How to Finance a Holiday Home in the UK
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This article is about obtaining finance for a UK based holiday home.
We get lots of enquiries from customers looking to take out a mortgage on a holiday home in the UK. Unlike a “holiday let”, a holiday home is a property for use by yourself and your family only; essentially a second home that you can escape to from time to time.
Getting a mortgage for a holiday home has a reputation for being difficult, but the good news is that if you’re buying a holiday home with no plans to rent it out, there’s a wide range of holiday home mortgages to choose from, and provided you meet the lender’s criteria, there are some great deals to be had.
This article covers the basics of getting a mortgage to buy a holiday home, including:
- Can you get a mortgage on a holiday home?
- What type of mortgage do you need for a holiday home?
- What size deposit do you need for a holiday home mortgage?
- Holiday home mortgage rates
- Holiday home mortgages with bad credit
- Find a Holiday home mortgage calculator
- Speak to an expert on holiday home mortgages today!
If you’re in the market for a UK getaway pad, we strongly recommend speaking to one of the expert advisors we work with who can help you find the best UK holiday home mortgage for your needs and circumstances: feel free to give us a call on 0800 304 7880 or make an enquiry here.
If, however, you want to know more about holiday lets, we’ve written about them here.
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Can you get a mortgage on a holiday home?
Many customers approach us to ask ‘can I get a mortgage on a holiday home?’. In the right circumstances the answer is certainly yes, as long as you meet the criteria set out by the mortgage provider, and the specialist advisors we work with can help guide you towards one that meets your requirements.
Don’t forget, all mortgage companies have slightly different lending policies, but ultimately you will need to demonstrate that you can afford the repayments on a mortgage for a second property, and that the condition and construction type of the holiday home you’re buying meets their criteria.
Holiday home finance
If you’re planning on buying a holiday home with a mortgage the most usual route is to take out a second residential mortgage in addition to the mortgage on your main home. There are a few different ways to approach this, and you can find out about second mortgages in more detail here.
Definitions in this area can be slightly confusing, so it’s a good idea to familiarise yourself with the terminology before you approach any lenders.
What type of mortgage do you need for a holiday home?
The type of mortgage you will need for a holiday home will depend on how you intend to use the property and whether it’s located in the UK.
If you’re planning to buy a holiday home solely for your own personal use, a second home residential mortgage will suffice. If you wish to rent the property out to holidaymakers and generate rental income from it, a specialist type of buy to let mortgage, often referred to as a holiday home mortgage, will be required.
Holiday homes abroad are usually less straightforward, as you would need an overseas mortgage in this instance – you can read more about them here.
What is a holiday home mortgage?
A “holiday home mortgage” is a specialist product designed for those wishing to rent out their property to third parties, and is a type of buy to let mortgage.
You won’t need to apply for one of these if the holiday home is for your own use, but you may hear the term ‘holiday home mortgage’ used informally to describe a second mortgage taken out in addition to one’s main residence to provide the finance to buy a holiday home.
Second mortgage for holiday home
As mentioned above, most buyers take out a second home mortgage when purchasing a holiday home. These work in much the same way to standard residential mortgages in terms of affordability, but the eligibility criteria tends to be a little tighter and the lender might want a bigger deposit, since a customer with two mortgages at once exposes them to a higher level of risk.
You’re also likely to be asked additional questions about how the property will be used when taking out a residential mortgage on a holiday home, since the lender will need to be satisfied that you don’t intend to rent it out in your absence. This would require a very different type of mortgage product, so you should expect to be quizzed on this point.
Can I remortgage my house to buy a holiday home?
Remortgaging is a popular way to unlock equity in your home, and if you don’t have ready cash to put towards a deposit, it can be a good way of raising funds for a second mortgage on a holiday home, or if you have enough equity to buy the holiday home outright as a “cash” buyer.
To find out more about how this works, take a look at our guide to remortgaging your property to buy another, here.
What size deposit do I need for a holiday home mortgage?
Mortgage providers tend to ask for larger deposits on second properties such as holiday homes, and many will want 25% of the property’s value or in some cases more, depending on your overall profile as a borrower. Loan to Value ratios (LTVs) tend to be offered at 75% on second homes, while a few lenders may offer 80% and a handful 85-90% in the right circumstances.
Holiday home mortgage rates
Mortgage rates on holiday homes and indeed all second properties tend to be a bit higher than those secured on primary residences. This reflects the higher level of risk to the lender, as with your existing property in the mix, you’ll be taking on a larger overall debt.
There are also likely to be fewer lenders to choose from overall, since not all operate in the second homes market – be sure to speak to an all-of-market broker to ensure you get the best deal for you.
Getting the best rates will depend on a number of additional factors, including the amount of deposit you can put down, your credit history, your income and age, the property type (the more standard the construction the better) and various other factors, which are listed in a bit more detail below.
Can I get a holiday home mortgage with bad credit?
It can be trickier to arrange a mortgage of any type if you have a history of bad credit, and any such transgressions are likely to be scrutinised even more closely by the lender when you’re applying for a second mortgage for a holiday home.
However, it’s important to remember that credit issues will be viewed as just one part of the picture, and as long as your overall risk profile is reasonably balanced, you should be able to find a willing lender.
Generally speaking, the less ‘serious’ the type of adverse credit and the longer in the past it occurred, the greater the chances of finding a suitable deal.
Those with more severe credit histories (such as instances of bankruptcy or repossession for example) will most likely need to find a specialist lender: speak to an expert with access to the full market if you’re in this situation, as some of these providers don’t deal direct with the public.
Find a holiday home mortgage calculator
We are not aware of any specialist mortgage calculator for holiday homes, however you should be able to find a general second home mortgage calculator on most lenders’ websites.
Calculating affordability for second mortgages is more complicated than it is for first mortgages, however, so using online tools such as these is unlikely to give more than a cursory estimate at what you might end up paying.
We recommend you speak to one of the experts advisors we work with as early in the process as possible for a realistic idea of the rates and deals available.
Frequently asked questions about holiday home mortgages
Here you’ll find the answers to some of the questions we hear most frequently about holiday home mortgages…
Can I get a holiday home mortgage in Northern Ireland?
Yes, it’s possible to get a holiday home mortgage in Ireland, though you might struggle to find the right lender without specialist advice.
Fewer mortgage providers lend for properties in Ireland and the ones which do tend to have postcode restrictions. Remote parts of the country, for instance, are not widely covered by Irish mortgage lenders.
Given that your choice of lenders would be fewer if you were buying in Ireland, favourable rates are more difficult to come by. This is why it’s important to apply through a whole-of-market broker, like the ones we work with.
If there’s a favourable holiday home mortgage deal in Ireland that you qualify for, they will find it for you, offer you bespoke advice and introduce you to the right lender.
Can I get a self-build holiday home mortgage?
It will help if you have the necessary expertise and experience in property development, if you’re hoping to secure a self-build holiday home mortgage to construct a property to your own specs (or oversee its construction).
Not all mortgage lenders offer self-build, and the ones which do usually charge higher rates and are cautious about who they offer them to.
Specialist advice is highly recommended for deals of this nature, so make an enquiry here to speak to a self-build mortgages expert.
Can I get a commercial mortgage on a holiday home?
Commercial mortgages are not usually available for residential properties, but there are scenarios in which it may be possible to get one on holiday homes.
For instance, if you were launching a holiday let business comprising multiple properties, or buying a holiday home to run as a B&B or guesthouse (depending on how much non-residential floorspace there is).
For more information, see our commercial mortgages hub here or make an enquiry to speak to an expert.
Are there any other holiday home mortgage rules I should know about?
There are a few other points to consider…
- Some lenders place a cap on the amount of days per year you can spend in a holiday property you purchased for personal use.
- The 3% stamp duty surcharge on additional homes applies to holiday homes
- A holiday-let owner will have to pay council tax
- Money from holiday lets that is income needs to be declared to HMRC
Speak to an expert on holiday home mortgages today!
If you’re looking to take out a holiday home mortgage in the UK and would like to discuss anything relating to topics in this article, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.
The advisors we work with will be happy to talk you through the options and well as offer insightful information, facts and helpful tips on how to get the best deal.
Once our team have a good idea of your circumstances and requirements, they’ll get to work finding the broker with the right expertise for you. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.
Holiday Home Mortgage Information
Looking for specialist advice? Read through our articles for information about Holiday Homes, and how best to prepare yourself to find the right mortgage for you.