Holiday lodge finance

Poppet21

We are trying to raise £100k to finance our first holiday home. We are looking to rent out the lodge for most of the year, but we will have some private use out of it. We own our own property, value £350k appx and we have a repayment mortgage of about £50k. We also have 3 endowments that are due to mature in 2018 at an appx value of £75k. What is the best way to finance this? Our mortgage company are not interested as the lodge isn't 'bricks and mortar'!

herbiesjp

You can always raise the money from the equity in your current residential place, to buy the holiday home outright. Assuming your income is enough and you have a good credit history you will get normal high street rates

depurnell

Your current lender should allow you borrow an additional £100,000 against your current property otherwise you could consider re-mortgaging to another lender.

Kind regards,

Damian Purnell
Mortgage & Protection Consultant

toonfish

the other thing you need to consider is the length of lease, and what you get at the end of it. I talked a client out of buying a place in Tintagel when I advised that his weekend breaks and summer holiday would be costing him in excess of £8000 per year, without factoring in any interest on the loan if he borrowed the capital and in 30 years time he would be left with nothing.

The downfall with this particular property was that also they were expressley forbidden to rent it, so no income generating potential

maninthestreet

I assume it's made of wood - doesn't £100K for a shed, even a large one, sound a tad expensive?

SouthCoast

Have you had independent legal advice about the site owners terms and conditions?

HelpWhereIcan

There are lenders who will finance a timber/log property (actually no less durable than a bricks & morter property) but they will want to know a couple of things:

1. That the property is built on a 'proper' foundation and not (like one I had an enquiry for) basically chained to the ground. They want to know that it is a permanent structure, built to an appropriate standard and within building regs. Most are and easily fulfill the requirement for proper insulation etc.

2. That there are no restrictions on the use of the property. The problem most of these properties have is the fact that your use is sometimes restricted to 11 months of the year. I had an enquiry for one where you could not stay over-night in February. They are looking to make sure that the property has a reasonable resaleability and will not look at anything where there is restricted use.

As a second home, you should be able to get around 90% as long as your income will cover both the new mortgage and the mortgage on your main residence.

If the answer to either of the above is 'no' then your best option would normally to take a further advance/remortgage on your current property - time to be thankful for your equity.

If needed you could remortgage your main property/take a further advance to raise the deposit you need for the timber home.

Hope this helps

Poppet21

Thanks for the useful info. We are going to contact our mortgage company again as initially they would not offer a mortgage on a timber lodge.

We are hoping to rent out the property and purchase the lodge through an established park where they will take on the rental bookings. When the lodge is quiet we will then use it for personal use.

This is our first purchase of a lodge and would be grateful if anyone has any advice or can let us know what 'pitfalls' to look out for.

We will certainly be getting a solicitor involved once we have decided on the park and lodge.

herbiesjp

If raising the mortgage against your own property, your current lender only needs to know you are buying another property with the proceeds.

So if you go to them and say - I want a mortgage on a timber lodge, they will say no

If you ask them - I want to increase my current mortgage by £100k to buy another property outright, they will probably say yes (assuming you meet their lending criteria)

As they are not putting a mortgage on the timber lodge, the timber lodge would not have to meet the lending critieria - only your current property has to.

There are a handful of lenders of lenders that could look at a holiday let mortgage for you (as also highlighted above), but the easiest and quickest way of buying this property (if you really want to) is by raising the funds off your current property

Locoblade

Im sure youve done this already but if not its worth double checking with other owners on the park the realistic rental income you'll get each year to make sure it stacks up with the figures the park give you and the amount your re-mortgage will cost.

My wife's dad has a wooden lodge on a park somewhere and although the income from it isn't disasterous, I don't think its pulling in the amount of bookings he was lead to believe it would do and so isn't really making any profit on it. He does have to do the advertising / booking etc himself though, but with that in mind it would be worth checking what marketing the park itself does to ensure you get reasonable occupancy to cover your costs.

FraudBuster

........................

If raising the mortgage against your own property, your current lender only needs to know you are buying another property with the proceeds.

So if you go to them and say - I want a mortgage on a timber lodge, they will say no

If you ask them - I want to increase my current mortgage by £100k to buy another property outright, they will probably say yes (assuming you meet their lending criteria)