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Holiday Let Mortgages Explained: What You Need to Know · Host Planet: Airbnb, Holiday Let, and Vacation Rental Insights

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  This is the House Planet mortgage podcast, brought to you
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  in collaboration with House and Holiday Home Mortgages.
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  In today's show, we'll outline the top three things that
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  lenders look for in a holiday Let's investment.
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  And if you need any holiday let mortgage support, get in touch
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  with Triple H Mortgages today. Their team offer an unrivaled
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  service whether you're looking for your first holiday, let
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  loan, a remortgage or any other products such as residential,
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  bitelet and HMO mortgages. To get in touch with the team
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  team call 01453887179 or e-mail hello at hhhmortgages.com.
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  You can also visit the website for further details.
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  HH, mortgages.com/hostplanet. Welcome to the House Planet
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  Mortgage podcast. Our goal is to share everything
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  you need to know about holiday let mortgages and spotlight some
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  of the leading products on the market.
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  Today we're going to discuss the top three things that lenders
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  look for in a holiday let property.
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  And with me to discuss this topic and more is Joe Stallard
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  from House and Holiday Home Mortgages.
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  How's it going, Joe? Yeah, good.
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  Thank you, James. Thanks for letting me on.
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  It is a pleasure. OK then.
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  So first of all, we're going to discuss financing and the fact
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  that some people see it as the boring part of making a holiday
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  let's investment. But as you're going to explain,
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  it's a really important part of the process that you've got to
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  get right. Yeah, I think so.
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  I think, you know, it's, it's not the funnest thing when you
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  think of of an investment and particularly in a holiday
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  property, you know, you've got the different softwares you can
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  implement to, to help get bookings, you've got furnishing
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  the property, understanding who you're going to attract, you
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  know, all of those aspects of owning a holiday that are
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  arguably more fun than getting the finance right.
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  But I think what it's really important to highlight is that,
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  you know, this is a small niche area of lending.
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  And so actually the differences between lenders can really add
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  up and can really make a difference when it comes to a
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  successful investment or not. How important is it for holiday
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  let investors to deal with a broker then rather trying to do
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  it themselves and maybe approach a a lender who who who operates
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  in this space? Yeah, well you, yeah, I mean
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  you're probably asking someone with a very biased opinion on
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  that side of things, but I guess to sort of help illustrate why I
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  think it is important you go to a broker.
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  I was having a look at some some rates today and put a few
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  different sort of scenarios together.
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  So looking at a £250,000 mortgage, you know, between the
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  first rate and the fifth rate in the market over 2 years, you
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  could save yourself over £1700. So you know that is really a
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  significant, significant saving that goes up on a five year
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  products. You know looking at the numbers
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  there, it's over 4000 lbs difference when you add it up
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  over the 60 months of the five year products.
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  So working with somebody who knows the lenders, knows the
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  market can also make this process simpler for you as well
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  as just talking about pure numbers I think is a really
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  important piece of your holiday let kind of strategy and
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  involvement. I remember when I was starting
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  out and you couldn't find really that many lenders even just by
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  doing a Google search that were operating in the holiday let
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  space. And it was only after speaking
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  to a broker that I realized the amount of niche building
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  societies that that were operating in the holiday let
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  space. I think for me it really opened
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  my eyes to to what was possible after working with a broker and
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  I guess you experienced similar things with with your clients.
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  Completely, you know, especially pre COVID, this was a really,
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  really small market. COVID and holidaying in the UK
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  obviously highlighted the investment opportunity to a
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  number of people. And we've seen a growth in, in
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  holiday let's since then. And as a result, you know, more
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  lenders have have followed the demand and come into the come
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  into the market, which is great because we've helped shape a
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  number of their propositions and said what what clients are
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  looking for and what works for clients and what they need and
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  what they need to do differently.
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  But it is still a small area of lending.
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  You know, there are hundreds of lenders in the country.
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  There's, you know, probably depending on who's lending at
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  anyone time, probably under 30 people who have holiday lap
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  products. So when you align the quirks of
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  people's situations, the quirks of the property, the location,
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  making sure you get that very best deal, the right deal for
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  you can be tricky. And you know, you don't have to
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  use a broker. You can go direct and find these
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  people yourselves, but you can spend a lot of time doing that.
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  Too, To what degree are lenders getting involved in the space
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  more, and to what degree are they becoming more flexible with
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  the products that they're offering?
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  Yeah, I think as we see more lenders come into the space,
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  there's obviously an increased sense of competition.
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  So originally that looked like little features such as not
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  requiring clients to have a personal income.
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  Now that's become a little bit more common there.
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  There's less less stress and rigour on on looking at people's
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  personal income and more focus on the property.
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  But that wasn't always there. So you know, it's these kind of
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  rates are always going to be a little bit higher than your
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  residential rates. It's an increased risk to the
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  lender from an investment point of view.
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  But what we're seeing through more lenders coming into into
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  the into the space is yes, a sharpening of rate, but also a
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  bit more flexibility around some of those features.
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  You know, not all lenders used to understand that people
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  holiday in this country outside of Cornwall and the Lake
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  District. So you know, understanding that
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  actually we short stay slow. These short stays can now happen
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  in cities and adopting their lending criteria scenarios is
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  becoming more increasingly. So you mentioned there the kind
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  of the headline rates that are available at the moment.
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  What? What should people expect if
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  they're looking right now? Yeah.
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  So obviously usual caveats with Ray James, you know, these are
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  moving all the time. These are really based on very
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  vanilla test circumstances. You're going to be just under
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  the 5% mark depending on, you know, loan to value numberings
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  and you know, fees on there probably between zero to 2 1/2
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  grand, something like that. So at the moment, best case
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  scenario, high floors, low fives I would suggest.
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  Pretty good then at the moment it's definitely come down over
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  the last over the last year or so, a year or so.
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  OK, then we're going to run through the top three things
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  that lenders are looking for in a holiday let property.
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  So take it away with #1. OK, cool.
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  I think before I get into these, it's important to say that we
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  caveat all of these. So there are exceptions to
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  everything I'm going to say here.
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  Every time we look at something outside of this, we're adding a
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  different layer of complexity, which means that we're going to
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  be probably reducing the pool of lenders we have to go to and
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  increasing, you know, potentially the cost of of that
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  product. And that might, it might be a
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  good thing, you know, it might be that you've found a great
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  quirky property that people are going to want to come and stay
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  in. And so actually it's worth
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  taking hit on some of this stuff.
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  But if we're talking generically, I think the most
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  important thing that lenders are looking for really is the
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  location of that property that really builds into, is it going
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  to be rented out? Is it going to be successful?
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  Is it something they can confidently give you money to go
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  and buy in the knowledge that there's going to be demand for
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  that property to rent? Also, you know, they think the
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  worst of you is a borrower, you know, should you default on that
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  mortgage? Is it a property they're going
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  to be able to sell? If it's something that's often
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  I'll Ireland and Scotland with a ferry to get to, you know, it
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  might be a great fun adventure holiday for somebody, but for a
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  number of lenders that difficulty of potential sale and
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  everything like is probably going to probably going to mean
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  that then. So location I think is
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  absolutely the most important thing that the lenders are
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  looking forward to start with. Yeah.
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  And you alluded to this earlier as well with the location.
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  There are some lenders out there who want every property that
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  they lend on to be in a very traditional holiday let hotspot
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  area. So I guess doing your research
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  from the outset and understanding, you know the
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  market and who your target guests are and making sure that
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  that property is going to be filled most of the year is just
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  imperative. It's exactly that.
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  And you know, if you think about how holidaying in this country
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  has has developed, you know it it fits the mold.
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  So you would have typically gone to a coastal location for a a
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  bit of a summer holiday. Whereas nowadays, you know,
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  there are many people going to stay in Nottingham to go to
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  Trambridge and watch the cricket, for example.
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  You know, there are these these reasons that people will go to
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  different areas in the UK and lenders are getting better at
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  understanding that because it's become, you know, the term
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  holiday that is definitely still there and still the right one to
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  use. But these to be seen as sort of
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  short, short stay style properties and that opens up
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  city centre locations as well. Absolutely.
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  OK then, so tip #2. Tip #2 is really understanding
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  the property condition and the readiness.
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  So I think if you're looking to buy a property for yourself to
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  live in, then there's an understanding that the condition
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  of the property doesn't need to be as potentially as attractive
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  as it is. If you're buying a property that
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  you're going to rent out to, to holiday makers, I used the
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  phrase earlier that you know, they assume the worst of you.
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  A lender is going to assume that you're probably going to do no
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  work to that property. So when evaluation happens as
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  part of the mortgage process and the value goes into that
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  property, they're going to be thinking, OK, is this property
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  going to be somewhere that people want to want to go and,
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  and stay in? So, you know, is it not just
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  livable, but is it actually rentable?
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  So there's a bit of a bit of flex within that.
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  You know, lenders will understand that you're probably
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  going to do a liquid paint and stuff like that.
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  So it doesn't need to be perfect, but they're really on
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  the whole not looking for refurbishment products.
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  Now if there is something that needs to be done, again, lenders
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  are getting better at helping in those scenarios.
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  So for example, if you want to put a new kitchen in and we can
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  prove on top of the deposit and the stamp duty and all of that
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  sort of stuff to buy it, that you've got the extra funds to
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  service the mortgage for a few months whilst that works and you
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  know, ongoing, then there are conversations to be had there.
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  But ultimately, think about you want that to be lettable, not
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  just livable. Yeah, exactly.
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  Yeah, the the lenders want to know that you can get renting it
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  out straight away so that so you can afford the mortgage
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  basically. OK then, Joe, so tip #3.
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  Well, the third one is really understanding the the planning
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  and any usage restrictions around the property.
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  So, you know, there might be certain areas that prohibit
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  holiday letting. If we're thinking about
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  leasehold properties, there might be conditions of leases
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  that you know, unbeknown to the vendor because it's something
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  they've never tried to rent out themselves, but might prohibit
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  you using as a business or renting in that regard.
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  So really getting on top before you get too far down the
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  journey, I think and spending too many costs on on other parts
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  of the process, but really understanding am I going to be
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  successful in using this property as a holiday let as I
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  want to. So if you are buying leasehold,
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  try and get a copy of that lease as early as possible.
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  Go through it, get an expert to go through it.
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  Make sure there are going to be no restrictions that that stop
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  you renting the property out. And likewise, you know, if
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  there's areas with certain planning permissions or
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  restrictive covenants or that sort of thing.
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  Do your homework. You know you should do your
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  homework on on all aspects of of the process of course, but you
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  know a little bit of upfront work can save you a lot of time
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  but also cost as well. Yeah, I mean the, the vast
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  majority of leaseholds, many of them prohibit operating short
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  term rentals. So yeah, don't don't assume that
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  it's going to be OK. And of course wherever you're
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  buying as well, you know, check out the local regulations, you
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  know, if you're in Scotland for example, the situation is going
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  to be different in England as it is in Wales.
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  So yeah, lots of things to check and and do your do your research
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  on. OK then Joe.
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  So just give us a quick blurb about Triple H mortgages and
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  where people can find you. Sure, absolutely.
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  So we're a family run mortgage brokerage.
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  We work across all of the residential market, but have a
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  particular speciality in the holiday let and short term
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  sector built, you know, pre COVID, understanding that this
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  was a small area of mark of lending that really needed
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  specialist advice. So, so we've worked hard to
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  develop that. As I said, we work with lenders
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  to develop their their holiday propositions.
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  So we're at the forefront really of understanding what clients
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  want and trying to be the the linchpin between the client and
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  the lender and making sure that that we can help with the
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  solutions. So you can find us at
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  hhhmortgages.com, triple hmortgages.com and we'll be very
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  happy to to help and talk through any scenarios.
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  We can always look over sort of right move links and give people
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  our thoughts on whether we think they're going to be able to
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  obtain lending or on something or not from from an early, early
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  outset. So, you know, any questions, get
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  in touch with us directly. Superb, and we'll put all your
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  links in the show notes as well so people can get in touch.
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  Joe, it's been a pleasure. Thanks for joining us on the
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  House Planet Mortgage podcast. Fab.
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  Thanks, James. All right, that's it for today's
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  House Planet Mortgage podcast. My thanks to Joe for joining us
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  on this month's show. To get in touch with Joe and the
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  team at Triple H Mortgages, call 01453887179 or e-mail hello at
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  hhhmortgages.com. You can also visit the website
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  for further details. hhhmortgages.com/host Dash
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  Planet. Until next time, happy hosting.