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Holiday Let Mortgages: Documents You Need + Affordability Tips · Host Planet: Airbnb, Holiday Let, and Vacation Rental Insights

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  This is the host Planet Mortgage podcast, brought to you in
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  collaboration with House and Holiday Home Mortgages.
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  In today's show, we'll be running through all the
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  documents you need when applying for a holiday let mortgage.
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  If you need any mortgage support, get in touch with
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  Triple H Mortgages today. The team offer an unrivalled
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  service whether you're looking for your first holiday let loan,
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  a remortgage or any other products such as residential buy
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  to let or HMO. To get in touch with the team,
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  call O 14538871 79 or e-mail Hello at hhhmortgages.com.
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  You can also visit the website for further details.
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  Hhhmortgages.com. Forward Host Planet.
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  Welcome to the House Planet Mortgage podcast.
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  Our goal is to share everything you need to know about holiday
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  let mortgages and spotlight some of the leading products on the
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  market. Today we're going to discuss the
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  documentation everyone needs when applying for a holiday let
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  mortgage. And with me to discuss this
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  topic and more is Joe Stallard from House and Holiday Home
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  Mortgages. How's it going, Joe?
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  Yeah, great. Thank you.
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  James, how you doing? Very good.
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  Thank you. OK then so documents you're just
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  about to apply. What do you need?
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  Yeah. Well, I think actually we can we
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  can go even back further before you're just about to apply.
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  I think that's one of the the really important things here.
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  It may not seem like the most interesting topic, but actually
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  getting your documentation ready can have a big impact not only
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  on the success or failure of your application, but also the
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  speed of that application as well.
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  OK, so take us back to the start then.
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  So take us through the journey. What What does the normal
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  journey look like when you're applying and what are the
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  documents that you're going to have to supply?
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  Cool. OK, so let's start really
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  simply. Every mortgage application is
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  probably going to need some form of proof of ID.
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  So here typically we're looking at a photo Ida passport or a
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  driving licence. So the thing for people to check
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  around this area really is that they're in date, you know,
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  expired documentation can't work for lenders.
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  So a nice simple one to start with.
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  The next one there as well really is, is your proof of
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  address. So this is typically we like to
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  see a recent utility bill or a council tax bill, crucially with
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  the address that you're actually living at.
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  Often people can forget to move things when they move home or
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  everything like that. And this is really just about
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  making sure that lenders can find you with credit searches.
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  And we're ticking those boxes to do the sort of bare essentials
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  in in getting ready for the rest of the more interesting stuff,
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  really. OK.
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  So we've got the ID, the proof of address, and I mean, you're
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  the expert here, but I'm thinking you've got to prove
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  your income, you've got to get your bank statements ready,
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  maybe your payslips or stuff like that.
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  Yeah, you can almost tell. You might have, might have gone
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  through the process before James.
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  Absolutely. So, you know, there are some
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  lenders out there that will work with no minimum income
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  requirements, but that doesn't mean they don't want to see any
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  documentation. They still want to understand
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  you as a borrower. So for that we'll, you know, for
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  your proof of income, if you're employed, typically it will be 3
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  months latest payslips. If you're new to a job or if
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  you're in a contracting role, they might want to see proof of
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  that contract as well. Now for most lenders, how much
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  you can borrow isn't really determined by these factors, so
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  it's more just them getting to know you and understand you as a
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  borrower rather than this information being used for
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  affordability like it would be with a residential product.
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  I see. So I mean another thing to
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  consider at this point and I am speaking from personal
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  experience here. If you are self-employed like me
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  and you run limited companies, how does this change things a
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  bit? Yeah, absolutely.
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  So for a limited company owner, it will be a latest three years
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  tax calculations and latest three years tax overviews.
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  There are guides on the HMRC website about how to download
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  these. Sometimes your accountant will
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  have them rather than you getting them.
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  If anyone has any trouble, get in touch.
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  We've got guides and stuff we can point people in the right
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  direction with. And maybe your latest three
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  years accounts as well. I'm using three years.
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  You know, that's the sort of standard.
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  There are lenders that will work with less for people who are
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  more, more new to self-employment.
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  But if we can use that as the gold standard, then I think
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  we're in a good place. And likewise for sole traders,
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  you know, we don't have the accounts requirement, but the
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  tax calculations and the tax overview documents, they're
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  going to be what a lender uses to understand your income.
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  I'm having a very similar issue at the moment.
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  I'm trying to apply for a new residential mortgage and because
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  House plan it's only been going for a couple of years, I need a,
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  a friendly lender who's going to look on me favourably and not
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  going to worry too much about the fact that we don't have
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  three years of, of accounts yet. So, so yeah, I, I know this pain
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  all too well. OK, then.
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  So we've got the ID, we've got the proof of address, we've got
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  bank statements, We've talked about what happens if you're a
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  limited company owner. What's next?
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  Yeah. Just to go back and touch on
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  those bank statements, So just a couple of things to raise there.
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  So again, it's typically going to be latest three months bank
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  statements for your current account.
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  If you're moving money into savings accounts or you know
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  might have an account with you know Lloyds and then have a
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  Monzo account which you do your spending from lenders are going
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  to want to follow the transfer of money as well just to
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  understand where it's going. So we sort of say three months
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  for kind of all, all active accounts and bringing it back to
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  the address point as well. We often see that when people
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  move home, they might forget to update bank statement addresses
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  and things like that. Try and get all of this
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  documentation aligned so that it's it's there and there's
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  going to be no questions asked from from a lender or a or a
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  broker. Another thing I've experienced
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  as well, and this is when I was an ex pat borrower and living in
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  Qatar, the lender wanted to know that I was a bona fide employee
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  of the the World Cup organizing committee.
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  So I had to get a letter from my employer on a letterhead paper
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  and signed by the HR director. Is this something you you see as
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  well? I imagine it is.
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  Yeah, a lender's always going to reserve the right to ask for
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  anything throughout the, the application process really.
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  So, you know, if there, there are slightly unusual
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  circumstances or if they have a look at something that's not
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  quite adding up to them, don't be surprised if there's, there's
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  questions. They're not, they're not
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  questioning. Well, they are questioning you,
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  but you know, in a, in a friendly way.
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  They just, they, they're, they, it's a very regulated industry
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  we work in. So actually being able to answer
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  these questions and tick these boxes is really important to to
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  them and they may not be able to proceed without it.
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  And I guess from the lender's point of view, for them, it's
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  all about mitigating risk, isn't it?
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  So whenever something is flagged, it's like, OK, we need
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  to tick that box and, and this is how we're going to tick it.
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  We're going to ask for a letter, we're going to ask for XY and Z.
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  And, and it could be, could be absolutely anything in regards
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  to affordability. What else do lenders want to
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  know apart from just seeing your bank statements?
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  Yeah. So when we look at affordability
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  in the holiday let space, lenders do things in different
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  ways. So the the most common way
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  they're going to work from is if it's a purchase is a projection
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  of that rental income for that holiday let property.
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  So how do you get that? Well, you go to a local or a
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  national holiday letting agent, you give them the details of the
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  property that you're looking to purchase and they will come back
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  to you with a letter. And again, we can template out
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  and share with with your audience, you know, what this
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  letter should look like. But ultimately it should be
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  addressed to the borrowers. It should state the property in
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  question that we're looking to purchase.
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  And then it's going to have a forecasted set of expectations
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  for that property. So they might break it out low,
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  mid and high weekly seasons and each of those weeks will have a
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  different rental value. And then perhaps they'll put in
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  there an idea of how many weeks of the year it would be rented
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  for as well. So that's the most traditional
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  holiday let borrowing affordability model.
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  It looks at low, mid and high weekly rates, averages at that
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  out over a period of the year. And then it's that figure that's
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  going to go on to determine how much you can actually borrow.
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  So you know, not even important for the application.
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  It's absolutely vital for the application because it's the
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  lender that the information that the lenders going to work from.
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  But actually before that for you to understand, you know, can I,
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  can I borrow how much I want to for this property?
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  That's the information we're going to need.
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  Yeah, exactly. You know, you need to know that
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  you're going to make a profit at the end of the day and the
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  lenders certainly want to make sure that you're making a
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  profit. And when you do request that as
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  Sykes Holiday Cottages, I think used to provide that kind of
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  those stats and that data for people.
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  But I think you can just go to a local agency, a local short term
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  rental company and ask them. And generally they'll give you a
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  projection of of what your property can can earn.
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  OK then. So we've got that for the
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  affordability. Anything else?
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  Any other documents that you want to flag before we kind of
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  go to the next stage? I think there's just a couple of
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  other areas. So on affordability, most
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  lenders will use the holiday let affordability model.
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  However, some will use a more traditional buy to let
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  affordability model. So you can still rent the
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  property out on a short term basis.
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  However, rather than using the figures like we just described,
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  they will base it off a traditional rental, a
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  traditional buy to let rental calculation.
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  So in that regard, it's a good, good idea to have a view as to
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  how much that property would rent for as a byte of that.
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  And if we go down one of those lending routes, then either a
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  sort of tenancy agreement ready to go or something like a Nile,
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  a letter, which is a letter from an estate agent stating that
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  this is how much the property is going to run for as a byte of
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  that. That's a really good set of
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  options to have the sort of 3rd and final option I guess for
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  holiday let affordability is looking at it on a traditional
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  residential affordability calculation.
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  So here you know your income that we spoke about earlier and
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  your credit commitments are going to be the driving force
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  and a lender's going to factor in, you know multiple running
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  costs and things like that. So they are fewer and further
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  between those type of lenders, but they are still out there.
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  I did have a lender before. This was when I was in Qatar.
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  They considered the low, medium and high season rental.
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  And I think that just about covered it as far as they were
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  concerned. But then they said it's OK
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  because we've we've seen your salary and we know that you can
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  top it up if there's ever a shortfall.
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  So they considered both. I guess there are lenders who
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  they won't just apply one rigid model.
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  They'll they'll look at the whole ecosystem of the borrower.
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  Yeah. So we call that top slicing in
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  the in the industry. So it's, you know, taking the
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  rental income and if it doesn't quite meet what we need it to,
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  it's looking at your own income situations.
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  And can we, as you use the phrase, top it up.
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  You know, the good thing about the holiday LED industry is it
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  tends to be smaller banks and building societies that lend in
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  this space that you can have a bit more of that dialogue with.
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  There are some that won't entertain that.
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  But again, they're looking for good quality business.
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  So if if you're, if you're a good client with a good property
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  and the numbers aren't quite there, don't let that deter you,
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  you know, do a bit more digging. So provided you've done all this
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  then and everything's been signed off and the lender's
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  happy, you should have a mortgage, right?
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  Anything else to mention? I think for those purchasing,
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  obviously your proof of deposit is a is another key piece.
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  So here is again about lenders understanding and following the
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  trail of money. So if you know, 50K suddenly
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  appears in your bank account, don't be surprised if they're
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  going to ask questions about where that's from, you know, so
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  if it's, if again, you're moving it from account to another, it's
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  be prepared, be prepared to provide those different bank
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  accounts. If it's coming in via a gift,
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  again, you know, depending on the amount, they might want to
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  understand how that that gifter has built up the funds.
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  There might need to be a gift letter to state that the money's
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  coming in as a gift and that person gifting it has no hold
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  over the property or anything like that.
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  So really just getting all all those ducks in a row is going to
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  put you in a great position. Fantastic and if people need any
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  more help and advice they should speak to the experts Joe and the
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  team at House and Holiday Home Mortgages.
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  Where should they go, Joe? Yeah, you can visit us at
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  hhhmortgages.com. Drop me an e-mail at Joe at
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  hhhmortgages.com or the team via Hello at hhhmortgages.com.
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  We can provide examples of those holiday let rental affordability
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  letters if you need to get a credit file and check on your
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  own credit position before applying as well.
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  You know, we've got links to sort of free trials for, for
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  credit reports and stuff like that as well.
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  So don't be afraid to get in touch.
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  Fantastic. We'll put all those details in
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  the show notes. Now recently, Joe, we've had an
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  interest rate cut, the base rate is down to 4%.
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  Have we seen any movement in the holiday let mortgage market?
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  Not really, James, you're going to be disappointed to hear me
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  hear me state, you know, to I guess educate some of your
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  audience slightly. I guess just because there's a
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  base rate cut doesn't necessarily mean there's that
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  knock on impact to to mortgage rates and in particular fixed
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  rates. You know, anyone on a, on a
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  tracker rate will go down. Yes.
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  However, there's more that goes into mortgage rate pricing than
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  aligning it with the base rate. So we haven't really seen much
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  of A drop in that regard as we speak today.
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  You know the best rates are still probably likely to be the
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  highest 4% more in the 5% with sort of 60% loan to value
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  products a bit better than their 75% counterparts.
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  And as ever, if you need a mortgage, if you need to discuss
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  your circumstances, make sure you get in touch with Joe and
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  the team. Joe, thank you for joining us on
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  this month's House Planet Mortgage podcast.
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  Pleasure as ever. Thanks James, see you soon.
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  All right, that's it for today's host Planet Mortgage podcast.
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  My thanks to Joe for joining us on this month's show.
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  To get in touch with Joe and the team at Triple H Mortgages, call
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  O1453887179 or e-mail hello at hhhmortgages.com.
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  You can also visit the website for further details.
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  hhhmortgages.com/host dash Planet.
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  Until next time, happy hosting.