Introducing Holiday Let Mortgages

Introducing Holiday Let Mortgages

The UK has been enjoying a real boom in staycation holidays so if your client is looking to generate an income from the holiday home of their dreams, whilst benefitting from regular getaways themselves, then here at Leek United, we are happy to support you.

 

Benefits at a glance

First-Time Landlords welcome
We allow borrowers to occupy the property themselves for up to 90 days a year
Mortgages are considered on an interest-only and repayment basis
We lend on up to 3 Holiday Let properties

Summary of our Holiday Let criteria

Summary of our Holiday Let criteria

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Affordability Calculation

Affordability Calculation

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Worked Example

Worked Example

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Summary of our Holiday Let criteria
 

  • First-Time Landlords welcome.
  • We allow borrowers to occupy the property themselves for up to 90 days a year.
  • Mortgages are considered on an Interest-Only and Repayment basis.
  • Maximum 75% Loan to Value.
  • Minimum personal income requirement of £20,000 (single or joint).
  • Minimum Loan size £25,000, maximum loan size £1m.
  • Minimum property valuation £150,000.
  • Maximum age of the applicant(s) that we will consider is 90 years old (at the end of the mortgage term).
  • A valid Energy Performance Certificate (EPC) must be provided at an application stage and must meet a minimum rating of E.

 

In addition to our standard Buy to Let criteria, the following criteria applies to Holiday Lets:
 

  • Must be a standard residential furnished property that is suitable for owner occupation and has no title, local or occupancy restrictions. Relevant planning consents must be in place. Leasehold properties will only be considered where the lease explicitly permits short-term letting or Holiday Let activity.
  • Must qualify as a furnished Holiday Let under HM Revenue & Customs requirements.
  • Lending on holiday parks, complexes, B&Bs, and Airbnb is not permitted.
  • A holiday letting agent must be in place. The property must be rented under a Licence Agreement. ASTs are excluded.
  • The applicant must own their own residential property.
  • Not available for Portfolio Landlords.

Affordability Calculation
 

We assess Holiday Let affordability using an average of the high, mid and low expected seasonal rental income. A reputable holiday letting agency must provide confirmation in writing.
 

  • The letting agent should confirm in writing a high, mid and low expected seasonal rate. We’ll then take an average of these seasons over a 30 week period to calculate the annual rental income.
  • Agent’s letting fees should be deducted (or assumed as being 20% of gross rents if not available or confirmed).
  • The net annual rental income must provide a minimum of 140% rental coverage based on 5.5%. 125% for like-for-like remortgages.
  • For Existing Holiday Let: Either existing trading figures in the form of certified accounts, a letter from the holiday letting agent confirming gross annual income for last 2 years, or SA100 tax document can be used.

 

Worked Example

 

Weekly Rental Income

30 Weeks Occupancy

Total

High Season

£1,200

X 30

£27,000

Mid Season

£900

Low Season

£600

Average

£900

 

Deduct 20% letting agent fees

£27,000 x 20%

£5,400

Net annual rental income

£21,600

 

Must be equal to or greater than balance x pay rate stressed at 140%

 

Mortgage balance      x

Pay rate

x       Stress rate

£19,250

£250,000

5.5%

140%

 

Frequently asked questions

A Holiday Let mortgage is for a client who is looking to borrow money on a property that will be let out to the tenants on a short term basis for holidays, usually for no more than two or three weeks at a time.

It differs from a Holiday Home mortgage, where you borrow money to buy a second home that only you will use. Please refer to our residential lending criteria.

We allow borrowers to occupy the property themselves for up to 90 days a year.

We assess Holiday Let affordability using an average of the high, mid and low expected seasonal rental income. A reputable holiday letting agency must provide confirmation in writing. We’ll then take an average of these seasons over a 30 week period to calculate the annual rental income. Agent’s letting fees should be deducted (or assumed as being 20% of gross rents if not available or confirmed). The net annual rental income must provide a minimum of 140% rental coverage based on 5.5%. 125% for like-for-like remortgages.

Whilst we make our assessment based on the rental cover please note we have a minimum personal annual income of £20,000 which can be single or joint.

For Existing Holiday Let: Either existing trading figures in the form of certified accounts, a letter from the holiday letting agent confirming gross annual income for last 2 years, or SA100 tax document can be used.

Our Holiday Home mortgages are currently only for applicants who currently owned their residential homes. We do welcome applications from First Time Landlords though.

No. Long-term tenants fall under the category of the Buy to Let mortgage as tenants will be using the property as their main residence rather than a short term holiday.

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