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  • Writer's pictureBrian

Buying a holiday let or second property?

If you are looking at buying a second property or holiday let and you complete the purchase before March 31st 2021 you can benefit from the stamp reduction. For example a £300,000 purchase would result in Stamp Duty tax of £9,000 but if you complete after April next year this will be £14,000.

Lenders will allow you to have second mortgages but they will need to understand how exactly you will use this additional property. Below are some handy points

For use as a second home:

  • Perhaps you would like a home in Cornwall or West Wales to stay in on holiday or that is close to family. If you intend to use the property purely for yourself or to have friends and family stay, then you can apply for a residential mortgage. This will normally be on a capital repayment basis unless you were buying with a substantial deposit. A second residential mortgage is not obtainable with all lenders, but is common and will not come with a loaded interest rate

  • Affordability is based on your income and monthly outgoings including the cost of running your main residence

  • Second home mortgages can typically be secured with 15% deposits

  • There are some lenders who can consider letting out seconds home for up to 90 days of the year but you will be very limited

For use as a Holiday Let

  • Short term holiday letting can yield a higher turnover than a standard 6-12 month tenancy rental property. The flip side to that is your property may sustain more wear and tear and need constant decorating and attention. Holiday lets are still not that popular with lenders so you can expect higher interest rates. Rental properties are taken on Buy To Let terms which means they are not regulated by the FCA.

  • The amount you can borrow against these properties can be based on a variety of criteria, not just the potential rental income.

  • Holiday let mortgages typically can be secured with 25-30% deposits

  • Some lenders may allow you to stay in these rentals as well as renting them out. But most require that your intention is never to live/stay in the Holiday Let

Letting through Airbnb:

  • This is a popular way of renting out your home for a weekend or a second home on a regular basis. If you already have a mortgage on your property check with the lender if they allow this - most do not.

  • In the eyes of a lender, Airbnb is still viewed as higher risk so not all holiday let products can be used for this. You will normally be looking at specialist lenders and smaller building societies for this type of borrowing.

  • Deposit sizes will be the same as normal holiday lets, 25-30%

Contact your broker to understand more


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