CS Mortgage Solutions – Second Homes and Holiday Lets
Joanne Varey, a mortgage adviser at CS Mortgage Solutions, talks us through second homes and holiday lets.
I’ve been working at CS Mortgage Solutions for a year. Prior to this, I worked at the Yorkshire Building Society for 19 years doing mortgages. Where I was the branch manager for the last seven years. When the position was made redundant last year I saw it as a perfect opportunity to go back to doing mortgages, which I feel very passionate about. The good thing is now I don’t just look at one lender. I could look at over 50 different lenders. So it’s a lot better.
Windermere and the surrounding area must be a really sought after area for second and holiday homes
Yes it’s a really sought after area. Who would not want to live in or have a holiday home in the Lake District? We have seen an increase in interest in the area, so it is always growing.
What is the difference between buying a second home and a holiday home?
The main difference is the time you spend at each of the houses. So a holiday home you are only allowed to spend a limited amount of time in it and then the remainder of time is used to generate income. A second home is more for yourselves and your family to spend time in.
So let’s look a little bit closer at Holiday Let Homes
Holiday let is when someone wants to borrow money on a property to generate income. In July “Holiday Let” was in the top five most searched for by mortgage brokers. Due to Covid less people are travelling abroad and choosing to stay in this country. It is expected to be a trend that will continue in the coming months with the travel bans and stamp duty holiday.
What deposit do I need for a holiday let mortgage?
Minimum, normally of about 25%, that does depend on different lenders, but generally as a whole it’s 25%.
How do lenders assess how much I can borrow?
Well with a holiday that is all down to your rental income, so it’s a bit different to a normal mortgage. You can get an idea of this from if it has previously been a holiday let property and how much it has generated. There will obviously be busy times and quieter months, so over the year they will take an average rental amount to assess the income the property will generate. It has to be over a certain percentage of the interest payable on the stress rate which is a little over 5%. It sounds complicated but it is not, but this is where we come in and we can help you make sense of it all.
Can you stay in your holiday let home?
Yes you can stay in it, but as an average no more than eight weeks in a year. The lenders assessing the income over the 12 months of the rental income take this into account.
Can you advertise your holiday home through Airbnb?
So Airbnb is popular, if you were looking to buy a holiday let most lenders will allow you to advertise it on Airbnb but not all. It is worth speaking to someone like myself, a mortgage broker, so we can find the right lender for the things you want to do with the property.
Are there any restrictions on the property construction?
The construction needs to be a standard construction, so it can’t be a holiday park, lodge or caravan. It would also have to be free of any local occupancy restrictions as well.
Let’s talk about second homes
There are a number of reasons why someone may want to get a second home. Sometimes it is because they have a long commute from their main home, so they may want something to stay in during the week and go home at weekends. Alternatively it could be a second home in the country that you can escape to at weekends. This is something we have seen more of during the Covid Pandemic.
The deposit for a second home is typically around 10-15%. On the whole you tend to need a bit of a bigger deposit for a second home.
With a second home the amount you can borrow is all down to the applicants salary and subject to normal credit assessment. They also take into consideration your main residence to see that if you’ve got another mortgage, that you can look after both and also the bills. So what they do for affordability calculations is that you need to cover both mortgages and both lots of bills for both houses.
How is stamp duty calculated for a second home?
Well, at the moment, until March next year, the same as your main residence, that’s gone down to zero, up to £500,000. Up to £500,000 on a second property has gone down to 3% and that’s the same for a second property and holiday lets are considered an additional home.