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Top 5 Holiday Let Mortgage Mistakes (And How to Avoid Them) · Host Planet: Airbnb, Holiday Let, and Vacation Rental Insights

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  Welcome to the House Planet Mortgage podcast.
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  This series about holiday let mortgages is brought to you by
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  House Planet and House and Holiday Home Mortgages.
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  On today's show, we'll outline our new collaboration with
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  Triple H Mortgages and discuss 5 common mistakes that investors
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  make when applying for a holiday let product.
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  Ben, thank you for joining us on the host Planet Mortgage
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  podcast. First of all, I'm really excited
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  about the new strategic partnership between House Planet
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  and House and Holiday Home Mortgages.
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  So let's start by talking a little bit more about Triple H
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  mortgages. Tell us about your unique
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  selling points. Yeah, Hi, James.
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  Thanks again for bringing me back.
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  It's it's also a pleasure to be on the on the podcast.
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  And yeah, the strategic partnership's an exciting
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  venture. So HHH mortgages have been, have
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  been soft operational for the last 10 years, I believe now
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  family LED business with Mark Stallard and Joe Stallard who
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  directors and, and, and yeah, what they did is they obviously
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  10 years ago when the holiday let market, mortgage market was
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  somewhat of a new concept. They they saw the opportunity to
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  kind of really focus in and identify and work with the
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  lenders, you know, that and understand their sort of their
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  products and their concepts. And, you know, that's grown, you
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  know, the last few years and, you know, bringing on new
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  advisers like myself with kind of expanded the business and,
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  you know, very much kept that kind of family business feel
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  about things. You know, it's, it's, you know,
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  it's all very personable and you know, you know, phone calls,
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  emails, all you know, you're going to go straight through to
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  us every time. It's not that kind of corporate
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  feel and and yeah, and absolutely what we've primarily
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  focused on is, is just establishing those relationships
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  with the lenders that in this space we're finding, you know,
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  that people have found that some mortgage brokers don't quite
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  understand the area very well. And you know, just calling on
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  our expertise, you know, we've got direct contacts with a lot
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  of the lenders. You know, we get updates before
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  they're announced, you know, with any changes criteria,
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  affordability announcements, etcetera.
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  So yeah, we've just kind of rubbed that wave of last few
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  years. Excellent stuff.
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  Yeah. So if you need a holiday let
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  mortgage or any other type of mortgage, make sure you get in
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  touch with Triple H Mortgages. We'll put all the details in the
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  show notes, website address, phone number, e-mail and all
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  that. So recently you mentioned Joe
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  there. Joe sent A blog post that we
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  published on our website and it was titled 5 Holiday Let
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  Mortgage Mistakes to Avoid. So we're just going to run
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  through this because we think it's really interesting and
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  useful advice, advice for our audience.
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  The first common mistake is ignoring location and market
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  demand. So just talk to us about this,
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  Ben. Yeah, no, good point.
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  And Joe's kind of identified a key key area here, which is that
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  demand for rental property, you know, to achieve boring the
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  desired borrowing, we need to evidence that that property just
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  generate a good income to get the point you need.
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  So you could have a property which would be possibly in a
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  city or, you know, close to good transport links, more kind of
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  standard in in nature, which which could work.
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  Maybe, you know, for, I don't know, people in transit or
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  something along those lines. Taking those that property to a
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  holiday like marketing agent, they may look at that different
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  viewpoint and might say look well, the rental demand.
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  Short term rental demand is pretty niche, pretty restricted
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  and therefore they may give you an indication of figures which
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  are not that strong. You know, with with with not
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  getting strong with forecasted figures that then impacts any
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  subsequent mortgage application then you may not get the
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  borrowing that you do need. There are instances now where
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  you can use top slicing for holiday let mortgage purposes.
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  Now after our last podcast, I did mention that top slicing was
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  general, well was not an option. And one of my lenders gave me a
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  quick phone call last week and said, Ben, did you know we do
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  top slicing on holiday like so, yeah, you know, there's always
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  crisis area points that we've got to meet.
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  And you know, if you do end up with a a property which isn't
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  supported on affordability because of its location, let's
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  say, then we could then potentially look at your
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  personal situation and your personal income and earnings to
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  help boost some borrowing potential.
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  Yeah. So just to explain that most of
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  the time the lenders are looking at what the holiday let is going
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  to earn as income and that's what they'll assess in relation
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  to how much they'll lend you and whether you can afford it.
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  And there are some lenders out there with top slicing.
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  Top slicing is basically where they'll consider your personal
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  income as well, so that if they see a little bit of a shortfall
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  in what that property can generate rate income wise, if
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  you can then pay for that with your personal income that that
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  basically will will cover the mortgage.
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  Yeah, it's more common in on the buy to let products, holiday let
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  stock products generally need to be stand alone self-sufficient
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  based on that rental income. But as one of my lenders
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  corrected me on this last week, you know there is that
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  possibility. Yeah, so, yeah, so First things
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  first then with the location and market demand, do your research
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  and you know, talk to property management companies and they
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  will give you a good steer of where the best locations are to
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  to buy. So if you're thinking of a
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  particular area, there's no harm in, in giving them a call and
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  say, look, you know, I've got my eye on these properties.
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  What do you think? Because the property management
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  company will think, well, maybe they've got a chance of, of
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  managing it in future. And I did this actually a few
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  years ago. I was thinking of buying
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  something on the East Coast and I talked to a, a letting a
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  property management company there and I sent a load of links
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  to different properties and she came back and said this is a
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  good option, This is not so good.
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  You know, I think a lot of them she'd actually managed before.
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  So, so she knew, she knew the ones that were going to work.
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  OK then. So the common mistake #2 is
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  using the wrong type of mortgage.
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  And we do hear of this, you know, quite anecdotally, people
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  who've maybe got a residential mortgage and they end up letting
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  it out for short term rentals or a buy to let mortgage.
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  Why is this not a good idea then?
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  Yeah, Well, this is a big no, no, no.
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  I mean, it does happen. Don't get me wrong.
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  I've come across many an instance and it's generally a
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  case of, like you said, where a property was originally a
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  residential and circumstances change and they didn't sell it
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  this they've moved on and now it's become a buy to let or a
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  holiday let and they've kept it on that kind of residential
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  products or maybe it was a buy to let and now it's on a holiday
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  let, kept it on that buy to let product.
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  You know, ultimately you're in breach of TS and CS and lender
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  can come down you on down and you're like a ton of bricks if
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  they wanted to. So it's always prudent to be
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  doing things correctly. You know, you don't want to end
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  up sort of incurring any, any penalties at a later date.
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  So with a holiday let short term let property, you know, it's key
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  to identify that it's not a vital let property as far as
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  mortgage lend is concerned. It's got its own niche space.
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  You know, mortgage lenders have adapted over the last few years
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  because more and more people were short term laying and these
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  buy to let products just weren't suitable.
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  So yeah, that's why they've created this this, this area
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  here. If your circumstances do change,
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  if, if you, if it was a residential property and then
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  you want to turn it into a holiday, let you, you really,
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  you should talk to your lender right and, and let them know
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  what you're doing and, and you know, because often they'll,
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  they'll try and help. They have to help you.
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  Of course, if you, if you are a customer of, you know, of any
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  mortgage lender, they will, you know, they will support you as
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  far as they can and they'll give you time.
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  You know, there'll never be any, you know, immediate pressure on
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  you, but they may say this doesn't fit with our so lending
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  policy. You know, they'll give you time
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  to kind of look at your options elsewhere.
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  You know, probably maybe point you to a broker so they can say,
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  look, you know, there's other lenders out there that could fit
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  in this space. We've, you know, we've done a
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  few transfers of property which were, you know, on a residential
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  basis. I've got a client actually this
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  week who's, who's, who's, he's done exactly that.
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  He had a residential mortgage, started to switch it to short
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  term, but business is going really well and actually now
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  he's thinking right, we need to kind of catch up and make sure
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  we're on the right product. So yeah, this is a remortgage
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  plan that's that's going ahead at the moment.
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  And yeah, fantastic property up in the Lake District and you
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  know, it's sort of, we're kind of getting already prepared to
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  go to application posting. Yep, So Yep, speak, speak to the
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  lender, speak to your brokers and and see what can be sorted
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  out. Number three then overlooking
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  legal and licensing requirements.
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  And obviously we're seeing more regulations like the licensing
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  situation up in Scotland. I think wherever you're buying,
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  again, this goes back to doing your research and knowing kind
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  of what you're going to have to meet from a regulation point of
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  view depending on where you are. Yeah, it's an ever changing
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  landscape as well. It's you know, Scotland's
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  introduces its own licensing requirements and that's, you
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  know, applications which need to go into the local authorities
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  there. They can take time, it could
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  cost money. London had its for many years,
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  the restriction on 90 day uses for short term rental and let
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  any of you wanted to extend beyond that again, planning
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  permission required. So each, you know, areas across
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  the UK are changing and adapting to holiday like second home sort
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  of investors. There are, there are changes
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  with council tax as well now. So we're seeing changes where in
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  Wales, you know, you've got a 200% increase on council tax and
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  business rates have gone. I think you know where England
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  is now following the same course.
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  I believe in certain. So you know, understanding where
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  you're looking to buy property, understanding the local
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  authorities restrictions and then licensing requirements is
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  key. Yeah, with the with the council
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  tax situation, some areas of the UK have doubled or even tripled
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  council tax on second homes. And then one of the issues in
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  Wales is that if you are running as a holiday, let, you need to
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  be let out for a minimum of 182 days a year, which obviously is,
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  is quite steep and much steeper than and England and I think
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  Scotland as well. So this is a, a major challenge
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  for people in Wales. So yeah, you, so you need to,
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  you need to be really aware of, of what's happening in, in your,
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  your different area where you're thinking of buying now #4 and,
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  and I, I imagine this is a bugbear of mortgage brokers and
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  lenders everywhere submitting incomplete documentation.
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  Yeah, absolutely. This is our problem.
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  Every single day. I think, you know, you're going
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  to go into so to submit mortgage applications, to speak to
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  brokers and you can progress in a timely manner.
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  Be prepared to get everything out on the table, OK?
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  You know, mortgage lenders have to kind of obviously do their
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  due diligence and ID checks and all that kind of usual stuff,
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  you know, in a compliant industry.
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  So it's all part of that process.
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  We've then got mortgage lenders as well who then will ask for
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  that information plus all the other bits and pieces that they
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  want to know about you. So it can feel a bit tiring.
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  I would say even, you know, from my perspective, you've got going
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  back and forth, go to bear with it.
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  You know, there's a, there's a reason why it's there.
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  There's a reason why we're doing it.
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  If we don't do it on a in a timely manner, it kind of
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  effects applications. Some lenders give you a
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  deadline. If it's not, then when we're
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  sort of one or two weeks, well, you ask your application and
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  kind of pulled and you kind of have to start again.
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  So a good broker will sit with you to give you a good
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  indication from, you know, what to expect with holiday.
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  Let's one of the key things that you do need to provide is that
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  forecast letter. So you mentioned before the
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  holiday let managing agents now you know, if you've got that
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  property that you've to go with, we need to know their opinion on
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  that property. We need to know what that rental
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  return is going to be so it can take them.
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  And I'm busy there. It could take one or two weeks
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  to kind of come up with that, those figures.
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  So getting all this information prepared and then when we're
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  ready to go to application, we can just hand it out when it's
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  requested. It's always a good place to be.
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  Yeah, you need to be prepared, especially if you're
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  self-employed, you've got limited company and your own
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  personal tax returns like me. It means you get lots of
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  requests for loads of different documents and yes, it is time
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  consuming and quite frustrating, but that's that's the way it is.
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  Always good to have the accountant's phone number to
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  hand, I'd say. Yeah.
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  Yes, isn't it just yeah, she's probably sick of hearing from
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  me. OK then.
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  So fifth one and not using a specialist holiday let mortgage
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  broker and I think probably the the challenge here is that most
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  High Street banks are not offering holiday let mortgages.
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  This really is a niche area. So speak to the experts right
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  then. Indeed, absolutely.
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  I mean, if you're going direct to to your bank, your High
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  Street, chances are you're they won't have a suitable products
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  for you. But you're also very kind of
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  narrow of scope obviously to try and find a solution as well that
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  you know, there are hundreds of lenders out there and hundreds
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  of products, thousands of products.
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  So, you know, speaking to a broker that knows that sector,
• 13:56
  well, we'll stand you in good step.
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  And I suppose it's a shameless plug for ourselves here, but you
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  know, this is what we've done for many a year.
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  And like I said at the start of the podcast, we've got those
• 14:07
  relationships with these lenders, which is I think is
• 14:10
  key. I think we know that the
• 14:12
  business development managers, which is basically our point of
• 14:15
  contacts, we know them on first name terms.
• 14:19
  We host and see them speak to them on a daily, weekly basis.
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  To some degree. We're going to get inside
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  information, you know, that can be kind of released on the on
• 14:30
  the quiet, I suppose, early doors.
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  So that's where the good brokers who know this in well, this
• 14:36
  sector has got to stand out from the crowd.
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  I mean, I've got, I know brokers obviously who focus more on the
• 14:43
  residential side of things. And and, you know, just
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  coincidentally, I had a conversation this week with a
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  broker I know very well and he he rang me up and goes, Ben,
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  just remind me again how this holiday stuff works is obviously
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  he's got, you know, the odd inquiry.
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  So even a broker who is, you know, active and, you know,
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  knows it the space well may not be quite up to speed on the
• 15:07
  holiday let side of things. So yeah, absolutely, you know
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  this, I think this is again, a shameless book, but it's a good,
• 15:13
  good time to call HHH. Absolutely, yeah.
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  And the number is 01453887179 or you can e-mail hello at
• 15:24
  triplehmortgages.com. And like we said at the start,
• 15:27
  we'll put all those links in the show notes so you can get
• 15:30
  straight through to Ben and the team.
• 15:33
  Ben, are there any decent products out there that we
• 15:36
  should know of? Where are rates looking at the
• 15:38
  moment? Yeah, I've done another kind of
• 15:41
  source this morning. Just have a look and it's
• 15:45
  interesting we're seeing some changes the you know normally
• 15:49
  the five year fixed products in relation to the you know was
• 15:52
  normally at a lower price, a lower rate in relation to the
• 15:55
  two year. We're starting to see those kind
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  of get closer together now. So there's not much differential
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  from a rate perspective. The discount products seem to be
• 16:06
  sourcing really well. So a lender will have their
• 16:09
  standard variable rate and they'll apply a discount to that
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  for a two year period. Like I say, not suitable for
• 16:16
  everybody. And obviously, you know, taking
• 16:19
  the advice and looking at your situation and you know, giving
• 16:21
  that advice is, is fundamental really.
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  But if you know if, if that scenario works for you and
• 16:29
  you're willing to accept that kind of variable element to
• 16:33
  taking on an interest rate, 2 year fixed products and two year
• 16:37
  discount products are now kind of in the late 4%.
• 16:40
  So I'd say at the moment. OK, well that's that's positive
• 16:44
  Fours. So fours are not bad.
• 16:45
  When we started this podcast over a year ago, we were talking
• 16:50
  of sixes and sometimes sevens. So yeah, fours, fours, a big
• 16:54
  improvement. Absolutely.
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  And look, you know, we are talking about headline grabbing
• 16:57
  rates here with vanilla to use a mortgage term lenders scenario.
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  You know, property scenarios are key that I've had quite a few
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  enquiries in the last couple of weeks where we've had to kind of
• 17:15
  recommend a lender with a higher rate, like you say, sixes close
• 17:18
  to sevens just because of the property usage.
• 17:23
  And you know, this was a holiday let property, but it had,
• 17:26
  because it was such a large acreage, it had space for a
• 17:29
  residential and there was, you know, going to stay in the
• 17:31
  cottage there. Again, 99% of my lenders were
• 17:35
  said no, you know, so there is space at that.
• 17:38
  Higher interest rates, you know, grabbing those headline rates
• 17:44
  just needs to be very straightforward, very quirky,
• 17:48
  very vanilla, kind of a kind of case.
• 17:50
  Yeah, vanilla and probably a decent chunk of equity as well,
• 17:53
  I would, I would imagine. All right, Ben, thank you so
• 17:57
  much for joining us on this month's edition of the House
• 18:00
  Planet Mortgage Podcast. I glad you, James.
• 18:02
  Thank you very much. All right, that's a wrap on
• 18:04
  today's host Planet Mortgage podcast.
• 18:06
  My thanks to Ben for joining us on this month's show.
• 18:10
  If you need any mortgage support, get in touch with the
• 18:12
  team at house and holiday home mortgages.
• 18:15
  Their team can help you secure finance for a range of
• 18:18
  investments, including holiday let's residential mortgages, Buy
• 18:21
  to let expats and HMO products. To get in touch with a team,
• 18:25
  call O 1453887179 or e-mail Hello at hhhmortgages.com.
• 18:34
  You can also visit the website for further details.
• 18:37
  HH mortgages.com. That's it for today's episode.
• 18:40
  Until next time, happy hosting.