Should You Consider Holiday Let Mortgages?

Holiday Let Mortgages: With the continuous expansion of the UK real estate market, more and more strategies and methods started to grow in popularity. Even new options can be very helpful for investors wanting a piece of this pie. For example, holiday let mortgages are such wonderful methods. You no longer need to stick to classic methods such as equity release to expand your portfolio. 

In this article, you will find all the information you need about holiday let mortgages and why and when it’s better to use a classic method such as equity release. You can also learn how to even use this method to buy multiple holiday proprieties at the same time. So, all you have to do is learn and use this information to maximize your future success in the real estate market. 

What Are Holiday Let Mortgages? 

Starting with the basics, you need to learn what holiday let mortgages are. Without knowing this basic information, you will be unable to properly use your resources, and your success chances in the real estate market will drop. So, what are these mortgages, and why are they so special? 

First, you should learn the purpose of these mortgages. As the name implies, this type of mortgage is used to purchase a property that will be used as a rental property but only for vacations or short periods. Even though there are similarities between this method with standard renting, there are also massive differences that you can easily think about. 

As for the mortgages that are specialized for this type of property, they are a custom type of buy to let mortgages. Of course, the buy-to-let method itself is still new and rarely used. But its effectiveness under specific circumstances is undisputed. So, it stands to reason that the holiday let option can also produce considerable profits for investors under the right conditions. 

What Are Buy to Let Mortgages? 

Not all investors are savvy enough in the mortgage field. Your principal interest as a real estate investor may not be to learn about this field, but it’s still complementary. You can reap massive benefits if you learn more about all the types of mortgages available in the UK and the best ways you can use them. So, you can start by learning about the buy to let mortgages.

This type of mortgage differs from the standard payment methodology options. You won’t need to pay a part of the debt monthly with interest, and you only need to pay the interest. As for the debt, you only need to pay it in full at the end of the contractual period. 

You should be able to imagine the main advantage of this method. The cash flow you get from using it is incomparable compared with other options. But the risks are also clear to see. You need to have the full amount of money ready when the contract ends, or you will lose the property. Of course, there are methods you can use to avoid this. For example, refinancing. 

What Should You Expect from Holiday Let Mortgages? 

There are many questions that you can have about the holiday let mortgages. But we can’t answer all of them in this article. So, you can only find a few of the most common and important questions you may have and need an answer to. The answer should give you a clear view that will help you form the right expectations about this method. 

The first question would be, what’s the minimum deposit? The practice is quite standard, and you almost always need a 25% deposit to get this type of mortgage. Yes, the amount is much higher than other types of mortgages, but the lenders take higher risks, which can be considered a sort of insurance for them. 

You also need to meet the minimum income requirements. And you should wonder what’s that? It is the minimum income requirement that a lender has to provide you with this type of loan. But it varies based on the maximum amount of the mortgages and varies from one lender to another. 

You Can Use an Equity Release Instead 

A common alternative that real estate investors use is equity release. This method allows them to get a mortgage much faster and with much better conditions than almost any other type of mortgage. But the requirements are also quite hard to meet. 

To use his method, you need to have a lot of equity in a property, maybe even 100%. You can only look at the other options if you don’t have enough equity. But if you do, it may be in your best interest to use this option. When you start checking mortgages, you should start with these ones before you look at the others.

Of course, you also need to consider the risks and the method used to use the money. Remember that the more mortgages you have, the higher your risks will be if you ever encounter a market crash. And you can also choose to use the equity in a single property or finance other mortgages. 

Should You Use Equity Release to Buy Several Holiday Let Properties? 

If your financial capabilities can ensure minimal risks regarding the impossibility of paying the mortgages, you may want to consider using the equity release to finance several holiday let proprieties. You can increase your portfolio massively with this method. But the requirements are also quite high. 

Your income must ensure the lenders that you will be able to make the payments regardless of the success of your investments. So, if you can’t make enough money with the proprieties you get through the mortgages, you must be able to make the payments from other income sources. Of course, you must also consider the risk in case of a market crash that may cause you massive portfolio losses. But you are the one that decides how much you can and want to risk.