Whether you’ve always dreamed of owning a pretty holiday cottage, want to invest your savings into a lucrative property, or wish to join the thriving holiday let industry, there’s plenty to learn when it comes to buying a holiday home! There’s all the potential to generate a healthy profit, but it’s essential that you understand how things work, from mortgage lenders to legalities to location.
If you’re starting your journey from scratch, this is the article for you! Here, we’ve put together five steps to buying your holiday home, offering plenty of inspiration and information before you get started.
1. Decide what you want to buy!
It might be that you’ve always envisioned a specific type of holiday home – a modern city apartment, lakeside cabin or quaint country cottage. But whether you’re decided or not, it’s important to really think about what you want to buy and to be practical because unfortunately, on paper, your dream property might not be feasible.
There are plenty of factors which could hamper your plans. There are restrictions in some areas which don’t allow for new holiday homes; mortgage lenders won’t lend to certain types of properties such as shepherds huts (despite their huge popularity); and some locations simply won’t suit holiday makers if there aren’t good amenities nearby.
Mortgage lenders and potential guests will want to see potential in your holiday let. This means a convenient location which is easy to travel to, a home which is furnished to a high standard, and one which boasts modern facilities – dodgy Wi-Fi, unreliable heating and tired décor won’t appeal!
If you’re looking for more information about what properties you should be avoiding, click here.
2. Sort out your finances
It’s the big question that you need a realistic answer to – how much can you spend? This means the initial deposit as well as any necessary funds to getting your holiday home up and running. Essential outgoings such as housekeeping and management are easily forgotten as you get caught up in the excitement of holiday homes, whilst you’ll probably also have to set some money aside to give your property a good makeover. Whether you’re just adding a fresh lick of paint and quality bed linen, or investing in an entirely new bathroom, you need to sort your budget!
Holiday home mortgages also require a bigger initial deposit than residential mortgages, so you’ll need to talk to a professional and work out how much you’ll need to put down at the start. For more information about mortgage deposits, click here.
3. Put your business hat on!
It’s all too easy to get overexcited with visions of a happy holiday home and forget that you’re hoping to start a successful business. We hate to put a dampener on things, but there’s a lot of hard work involved, and you’ll need to put together a solid business plan.
Essentially, you’ll be focused on two things: firstly, how to generate revenue from bookings and secondly, once you’ve secured those bookings, how to ensure that you end up with satisfied guests. You’ll need to work on solid marketing and pricing strategies, do research into holiday home necessities and safety checks, and decide whether you’re going to need employees to help manage the workload, to name just a few things!
4. Learn about holiday let mortgages
You might be surprised to learn how holiday let mortgages differ from regular residential or buy-to-let mortgages, with stricter lending criteria, a hefty deposit required, and fewer lenders in the market. You can’t simply phone your local bank and say, “I have a deposit ready and waiting and I wish to get a mortgage on a holiday home.” Even if all your finances are good, you have a clear credit history and you know what you want to buy, it’s not that easy!
Among other things, those existing holiday let mortgage lenders will want to see proof of your projected rental income to ensure that you can cover the mortgage payments, and this usually involves help from a professional holiday agent. They will also want to see that the property is suitable security against their loan and has good potential as a holiday home.
Discover more mortgage criteria by reading our dedicated article, here.
5. Find your lender…
Or let HCM find one for you! We hate to tell you this, but Googling ‘holiday home mortgage providers’ isn’t going to be very helpful – it’s far more likely to lead to hours of scouring through banks’ websites and trying to work out if they would give you a mortgage. Even if they do lend to holiday homes, many mortgage providers don’t actively promote this on their website. This is where HCM comes in; we keep a close eye on the market and that select handful of potential mortgage lenders out there, saving you a lot of hard work and wasted time in the process!
Not only can we check whether you’re eligible for a holiday let mortgage, we can find a lender which is best suited to your individual circumstances. This prevents you from spending hours on an application with a specific lender, only for it to fall through and find yourselves back at square one.
Get started now, by filling out a free application here.
The information contained in this article is accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time and so please speak to one of our Consultants to confirm the most accurate up to date information. Nothing in this article constitutes financial advice. Please always consult your accountant or solicitor for all financial, taxation or legal matters. Your home may be repossessed if you do not keep up repayments on your mortgage. Pure holiday let, buy to let and commercial mortgages are not regulated by the FCA.