What brokers need to know about the holiday let boom – Dumbleton

by: Bev Dumbleton, chief operating officer at Sykes Holiday Cottages
  • 03/09/2020
  • 0
What brokers need to know about the holiday let boom – Dumbleton
Mortgage brokers may well be seeing a sudden influx of holiday let enquiries and the rising popularity of these investments is a trend that’s likely to continue in the long term.


So now is the time to learn all there is to know about the holiday let market to get ahead of the pack.


Buy-to-let versus holiday letting

Which is best for your client really depends on how much work, maintenance and time they are willing to put in, but if it’s a profitable income they’re after, then holiday letting is fast overtaking buy-to-let.

Many buy-to-let landlords are turning to holiday letting to cash in on the increase in UK tourism.

Unlike holiday let owners, landlords are no longer able to deduct the interest they pay on their mortgage from the rental income they declare to the taxman.

Not only is there greater flexibility and potential profitability when owning a holiday let, but there is also the added benefit of being able to make use of the property yourself at times.


Mortgage and finance terms

Holiday let mortgages differ quite substantially to those for buy-to-lets.

Most buy-to-let mortgages have conditions attached to them, with a minimum term of six months for tenants. Letting for a shorter period than this will break the terms of the mortgage.

As more investors are buying holiday let property, more lenders are joining the market.

However, there still are not many products available and because of this we’re finding investors are turning to a mortgage broker or specialist lender for support.

The size of the deposit clients will need to secure a property will often depend on the mortgage product chosen, but it is likely to be a minimum of 25 per cent.

As ever, the larger the deposit, the better the terms of the mortgage.

While interest rates are typically higher than buy-to-let, holiday let owners can claim on the wide range of tax reliefs which are no longer available to buy-to-let landlords.

With an increasingly tough tax regime in recent years, it’s really no surprise that so many are turning to holiday lettings instead.

Other fees to consider when purchasing a holiday let include arrangement fee, survey costs and legal costs.

Usually there would also be a large additional stamp duty cost that comes when buying any property, however the temporary holiday on stamp duty means that cost has become substantially lower.

Second home buyers still have to pay the extra three per cent of stamp duty they were charged under the previous rules, but that is still a lot less than usual – meaning additional money to hold back or put towards a bigger deposit to secure a better mortgage term.


Strong earnings potential

Customers might also enquire about the long-term financing of their holiday let.

Earnings are dependent on a number of factors, most importantly the location of the property and facilities on offer.

There will also be additional costs to consider like bills, maintenance and repairs – much like the running of any property.

According to our data, the average income of a holiday home is £21,000 per year.

However, with the holiday let sector walking into its busiest period on record, earnings for summer 2020 and beyond are looking incredibly strong.



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