Categories: holiday lets | guides

Securing a holiday let mortgage doesn’t have to be overcomplicated, but it certainly helps to know some of the basic eligibility criteria and unique needs of holiday lets, before setting your course.

In this guide, we will cover the main points you need to know, and what you need to look out for along the way.

Understanding criteria for specialist mortgages

Holiday lets are similar to rental properties, except they have short tenancies. Holiday let mortgages are more specialist, because lenders have to consider the potential risk posed by multiple visitors coming and going.

You cannot have a standard residential mortgage on a holiday let, even if you will take your own holidays there (the maximum time you can spend in a holiday let – as the owner - is 90 days per year). 

For a property to actually count as a holiday let, it has to be let out for at least 105 days a year, and it has to be available to let for at least 210 days.

As well as demonstrating its role as a holiday rental, lenders will also require proof that your holiday let is not your main residence.

Location, location, location

Whether or not a holiday let is in a high-demand location is a big consideration for lenders. There’s little point in, for example, setting up a holiday let in an obscure inland town that attracts hardly any tourism.

Equally, areas that are very touristy may have high competition and oversaturation within the holiday let market.

You will have to disclose the expected rental income to the lender. Ideally, this should be 125-160% of the monthly mortgage repayments and it will most often be calculated as an average of the low, medium and high season rental income. Please note that some lenders calculate this with different methods.

Lenders may limit the number of properties they mortgage for you, or limit the number of properties they take on in a given postcode area (with you or with other borrowers) to mitigate risk, but there are many holiday let lenders to choose from so if this affected you, other lenders could be approached.

Confirming personal income and credit history

Lenders will often request evidence of your personal income to cover any void periods, and may specify the minimum income bracket they’re willing to lend to. This can vary from £20,000 to over £40,000 per annum, although Commercial Trust works with a range of lenders from across the marketplace.

Some set no minimum threshold, as long as you have some source of alternative income which could be from employment, pension or other rental properties. 

Although some lenders are lenient and flexible when it comes to an applicant’s experience in running holiday lets, you’ll find that most of them will want to see evidence of a robust credit profile on your end, especially when it comes to holiday let mortgage applications.

They want to know that you’re capable of managing the finances of your first property before they start considering second, third or fourth properties. As such, keeping up with previous mortgage payments is the best sign of reliability.

Role of a mortgage broker

You may be feeling slightly overwhelmed after reading all of these criteria and considerations, which is only a natural reaction.

With so many options, the truth is that figuring out the most suitable holiday let mortgage by yourself will be challenging and time-consuming, especially if you are entering the holiday let market for the first time.

That’s why seeking advice and support from an established mortgage broker can be very helpful. The expert advisors at Commercial Trust can guide you through the application process and pinpoint the best deals to suit your needs.

As well as our advisors, we also have tenacious account managers who are here to streamline the process of securing a holiday let mortgage as much as possible, taking all the stress off your plate. Call our team today.