While many people will enjoy relaxing during their break, others may ponder buying a holiday home to enjoy for years to come. As well as providing a base for future holidays, these properties can also be excellent investment opportunities.
However, what are the finance options for those seeking to buy holiday homes in the UK, especially when lenders remain cautious about potentially higher-risk mortgages?
One possibility for holiday home buyers would be to remortgage their principal residence, but this isn’t always possible and many are not in the fortunate enough position to have sufficient equity to do this.
Fortunately, a number of lenders are willing to lend on UK holiday homes, often advancing up to 80% LTV.
As normal, the decision to lend will be based on an assessment of the value and suitability of a property, plus whether the applicant can afford the loan, especially if it is in addition to an existing mortgage.
Lenders willing to lend against holiday homes include: Abbey for Intermediaries, Halifax, the Hinckley & Rugby, Nationwide, Northern Rock, Platform and Scottish Widows Bank.
All well and good for properties in the UK, but what if your client prefers an overseas destination?
Again, there are solutions available. Borrowing against UK property can be effective if the client wishes to have a sterling-denominated mortgage.
Yet, some clients prefer to limit currency risk by holding their mortgage in the currency of the country where the property is located, perhaps if they have some income generated in that currency.
Several foreign banks have arrangements whereby British borrowers can set up a mortgage in the local currency and have access to English-speaking staff, to service the mortgage in the future. For example, CAM Bank, one of the largest Spanish banks, offers this service for Britons buying Spanish property.
Despite the involvement of some very large lenders, the holiday home mortgage market remains a niche with lenders being more stringent in their lending decisions.
However, we have been surprised at the re-emergence of interest in buying overseas, although it was only a question of when, given the significant falls in property prices and value that now exists.
So, before you are contacted this summer by clients interested in whether they can buy a holiday home, take the opportunity to review the mortgage options available.
Ross Bowen is mortgage services director at Connells
