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Holiday Home Mortgage
There are many reasons why someone may want to get a holiday home mortgage, also known as a second home mortgage. Perhaps you want a holiday home to enjoy with your family at the weekends or require a second residence to stay at for work or another home for a family member to live in. Lenders and products available for this type of mortgage is limited and may carry stricter lending criteria’s but certainly available.
Read on as we discuss holiday home mortgages in more details.
What are holiday home mortgages?
If you wish to buy a second property in the UK or overseas and don’t intend to let it out then you will require a holiday home mortgage or second home mortgage. They are different to a holiday let mortgage or buy to let mortgage which allows you to rent the property out so you will need to decide your intended purpose for the property.
Taking out a mortgage to purchase a second home for your own personal use is a similar process to getting a standard mortgage on your main residence. The main issue people may face when trying to get a mortgage for a second property when they already have an existing mortgage is the affordability aspect. Lenders would need to take into consideration your mortgage repayments on your main residence when assessing your financial commitments and deciding whether you can afford mortgage repayments on both properties. Fees and interest rates for a second home could potentially be higher than a standard mortgage due to the increased risks involved for the lender and not all lenders offer loans for second homes so rates may not be as competitive as standard residential mortgages.
Often you’ll be required to have a deposit of 15% – 25% but the more deposit you have the greater your chances of getting a mortgage providing your finances are in good order and having a bigger deposit could give you access to better rates.
Holiday home mortgages outside the UK
For second homes that are outside of the UK, you have the option to borrow from a UK bank or from a bank in the country where the property is located. Getting a mortgage for holiday homes located in a familiar location such as Spain or France may be easier than some other more remote places and you would usually have to use a UK high street bank with international branches.
Arranging for a mortgage with a bank in the country where the property is located may require a higher deposit compared to using a UK lender and mortgage requirements and processes may differ country to country and may not be regulated in the same way as it is in the UK. It is a good idea to be mindful of currency exchange rates and how fluctuations could affect the cost of a mortgage.
Costs to consider
There are a number of potential costs to consider before committing yourself to buying a second home. It is wise to carefully assess your financial situation to ensure you can afford all the expenses since you are unable to rent the property out to generate income with a holiday home mortgage. If careful consideration is not taken and arrears occur, it could affect and jeopardise your first home and put both homes at risk of repossession.
There are an additional 3% stamp duty surcharge added on top of the normal stamp duty charges for any property purchases that are additional homes and increases the costs of purchasing a holiday home or second home.
Other possible costs to consider are:
• Mortgage payments
• Council tax
• Property maintenance
• If the property is overseas, there might be exchange rates to consider.
Holiday lets or buy to let
If you wish to let out your property for a rental income then you will require a different type of mortgage called holiday let or buy to let. These mortgage may come with certain added requirements from the lender and the assessment of these will need to include the anticipated rental income and other factors.
Looking for a holiday home mortgage through a professional advisor could help save you time and allow you to access a wide range of lenders both on and off the high street to help you find the best deal for your situation. Contact us today if you want us to find the right mortgage for you.