Holiday Let Mortgages

Holiday let mortgages are tailored for properties that will be let out on a non-permanent basis as holiday accommodation

It differs from a holiday home mortgage, which is when you take out a loan to purchase a holiday home that only you will use.

Buy-to-let property has always been a desirable property investment choice and is when you borrow cash to purchase a property which is going to be let-out on a long-term basis.

However, holiday lets are now proving to be an alluring alternative.

One of the advantages of a holiday let, is that generally, you can charge higher rates for short term lets compared to standard rental property. Consequently, assuming that you can let it out on a regular basis, you could yield a much larger income.

The taxman views furnished holiday lets differently. They're classified as a business, so this means it's possible to still claim tax relief on the mortgage interest. Compared, to buy-to-let properties where that relief is being reduced. www.gov.uk

For a property to be considered as a holiday let, instead of a buy-to-let, it needs to be available for rent as furnished holiday property for a minimum of 210 days per year.

Standard residential mortgages don't allow you to let out your home, while buy-to-Let mortgages are more suited to prolonged rentals.

To determine your affordability on a Buy-to-Let mortgage, a yearly rental sum is applied based on a presumed 6–12-month tenancy. Which means that those wishing to purchase a holiday rental, won’t satisfy the requirements for a Buy-to-Let mortgage.

Holiday-Let affordability, conversely, is calculated based on short-term letting throughout the principal holiday seasons.

The huge appeal of a holiday let mortgage is how the taxman perceives it. Since a furnished holiday let is considered a business, you can deduct all your expenses from your letting income before you are assessed for tax. This also includes the interest you pay on your mortgage.

In comparison, tax relief on buy-to-let mortgages is becoming less generous for higher-rate taxpayers.