For brokers with clients that own holiday lets, the first few months of the year present an ideal time to weigh up the cost of any renovation work that is needed and diligently plan for the year ahead to ensure their holiday lets are in full working order before the summer season hits.
Although the cold and wet period after Christmas and New Year may not seem like a good time to carry out renovation work, it is often the quietest time for both contractors and holidaymakers alike. And, in many cases, good deals can also be found on furniture and building and decorating supplies, making it the perfect time to get a holiday home in order.
Tapping into equity
If your client is coming to the end of their current buy-to-let term and needs to carry out more extensive renovations such as a new kitchen or bathroom, or needs to replace the boiler or heating system, or even buy another holiday let property, then remortgaging to raise capital is also a smart move as it will enable them to tap into any equity held in the property in order to cover the cost.
Most lenders are happy for borrowers to take on extra debt for improvements to an existing property as renovations are likely to make it more desirable to prospective guests and improve its overall market value, making it a safer risk for the lender.
Obviously, each case is assessed individually and tailored to the specific needs of your client, and the amount borrowed will depend on the affordability criteria set by each lender and in some cases, the mortgage amount is determined by the holiday letting rental income yield, rather than by the number of weeks it is let.
Know the options
The way the loan valuation is assessed will vary between lenders and in certain parts of the country such as coastal areas which are more seasonal, a different measure may be used. However, in rural areas that are often rented out throughout the year, the annual income affordability calculation would apply.
Typically, holiday let mortgages come with loan to values (LTVs) of up to 75 per cent and a minimum income of £25,000, which also makes them an attractive proposition for first-time buyers looking to purchase a more affordable property in another part of the country, although some lenders will still only lend to existing homeowners.
It is also worth remembering that while the owner of the property can often use the property themselves for up to 60 days a year – perfect for overseeing any renovation during the off season, properties in holiday parks and static non-permanent structures as well as those with multiple occupancy are generally excluded from the lending criteria.
If your client is looking to purchase a holiday let or carry out small or large-scale renovations to an existing one, it’s important to speak to a lender that specialises in holiday lets. This way you can ensure that you source the best deal for your client, so they can get their house in order before the busy holiday season starts.
