Can You Get a Mortgage for a Holiday Home?

There are many reasons why you might wish to buy a holiday home; either for your own use, or to rent out in order to gain extra income. Both are popular choices, but the avenue you go down can determine what type of mortgage you take out in order to buy the property.

In some cases, holiday home mortgages can be difficult to arrange, but if you do your research then you can ensure you are well-equipped with the right knowledge to make an informed decision.

If you’re looking for some advice on how to get a mortgage for a holiday home, Watts Mortgage & Wealth Management Ltd offer some helpful insights.

What are the different types of mortgages for holiday homes?

A mortgage for a holiday home can depend on how you will use the property and also what country it’s in. If you are buying a holiday home for your own use and don’t intend to rent it out on a regular basis, you should be able to take out a standard residential mortgage.

If you already have a mortgage on your main property, your holiday home will be bought under a second home mortgage.

Buying a holiday home to rent it out as a business, you will need to take out a dedicated holiday home mortgage. Unfortunately you won’t be able to take out a standard buy-to-let mortgage, as these products usually ask that the let is on an assured shorthold tenancy. Instead, you will need to take out a holiday-let mortgage.

How does a second home mortgage work for a holiday home?

A second home mortgage allows you to buy an additional property, which can be very handy if you have your eye on a holiday home. It’s important to consider the financial implications of buying a second property, such as additional stamp duty rates.

One of the biggest challenges in taking out a second mortgage is that lenders may have stricter affordability criteria, and you will likely need a large deposit of around 10% or more. In some cases you might have to prove that one of the properties is used as your main residence.

How does a holiday-let mortgage work?

A holiday-let mortgage is a niche product but they are available through some select lenders. You will typically be allowed to borrow up to 75% on a holiday-let mortgage, but you could access better deals if you can reduce this figure to 60%.

Lenders for holiday-let mortgages will likely look closely at rental income opportunities and how this affects your affordability. This is because rental income can vary hugely from season to season. You may find that you need to earn rental income that exceeds an agreed percentage of your monthly mortgage repayments.

Buying a holiday home abroad

Getting a mortgage for a holiday home outside of the UK can be easier if you’re arranging it in a popular or well-known market such as Spain. There are too main options, which include borrowing from a UK bank or borrowing from a bank in the country where the property is located.

Typically, major high street banks are easier to deal with but they are likely to only lend on properties in countries where they have offices. After your mortgage is arranged, you will probably work with their overseas office.

Whatever avenue you choose to buy your holiday home, it can be helpful to get independent financial advice. You can also work with a specialist broker to help you access the right deals with a suitable lender.