Mortgage for Holiday Home with restricted use HELP

miketv

Help please.

Hi everyone. Myself and my wife are both self employed, she's only recently self employed so does not yet have 1st years books. I have many years proof of income. Our plan has always been to not have a pension and instead invest in a holiday property, a pension that we can enjoy throughout our lifetime and so I have studiously been saving up a deposit. We have found a place we wish to buy, offer accepted and searches completed, and have a 30% deposit, (with help from family we can just about make a 40% if we really needed to).

However, at this late stage, despite getting an agreement in principle the mortgage we were applying for has declined to make a mortgage offer because the holiday has a planning restriction on it which states it can be used for 12 months of the year but for "holiday use only". Does anyone know of a lender in the current market that lends on properties with holiday use only?

Conrad

A specialist case this. Seasonaility will have an impact on rent return.

A few of small private finance houses will consider. One of them insists you are already landlords though.

Where is the property?
How far from where you work and live now?
What field do you both work in?
What will be the realistic rent pa?

miketv

Thanks Conrad,

We need to borrow about £100,000, with our 30% deposit, and would like a fixed rate for at least 3 years, possibly 5.

What is a private finance house? Is that dodgy? Am I going to get my legs broken?

Based on renting it out for a cautiously realistic 16 weeks pa, the gross rental income would be just over £10,000 pa. Obviously there would be fees such as changeovers/cleaning/maintainance etc. to come out of that, plus all the normal expenses and bills.

SimonMrGreenWard

miketv wrote: »

Thanks Conrad,

We need to borrow about £100,000, with our 30% deposit, and would like a fixed rate for at least 3 years, possibly 5.

What is a private finance house? Is that dodgy? Am I going to get my legs broken?

Based on renting it out for a cautiously realistic 16 weeks pa, the gross rental income would be just over £10,000 pa. Obviously there would be fees such as changeovers/cleaning/maintainance etc. to come out of that, plus all the normal expenses and bills.

Double check the costs for letting agent, they're normally pretty big for doing holiday lets as there is a lot of work involved.

If you find a lender, can you put on here?

poppysarah

Have you done it in such a way you know the minimum number of weeks and £ you need to make to break even?

And have a full summary of all local rival accomodation?

Conrad

miketv wrote: »

Thanks Conrad,

We need to borrow about £100,000, with our 30% deposit, and would like a fixed rate for at least 3 years, possibly 5.

What is a private finance house? Is that dodgy? Am I going to get my legs broken?

Based on renting it out for a cautiously realistic 16 weeks pa, the gross rental income would be just over £10,000 pa. Obviously there would be fees such as changeovers/cleaning/maintainance etc. to come out of that, plus all the normal expenses and bills.

No not dodgy at all. Rate circa 5% variable, no fixed available for this I'm afraid.
You'll need at least 35% deposit. Lenders are completely inundated with business and experience far more demand than thier is fund supply so it's touch and go whether anyone will take this really.

Forget the usual b2l providers.

If it were me I'd maybe frame this as a second home rather than an investment. That would likely have a better chance of sucess.

Also I'd buy an alternative touristic property - one without the useage restriction as this clause alone will deter most lenders as they want to be able to sell it quickly to an unrestricted normal buying audience in the event of repossession.

Good luck.

PasturesNew

Have you researched the market properly? Or just guesstimated? I am next to a holiday let that's being let out for the first time this year, through an agent. Agent fees are about 15% I think, PLUS management costs to look after the place. Plus cleaning each time. Plus linen/bed changing each time.

So far it's had seven weeks booked and two weekends. Last lot did serious damage/mess to it, lot before that had dogs in there, currently there are a bunch of teenagers. Often, after it's been let out, the management team are in there almost as long as the holidaymakers were. I've seen a gas man (half a day), a gardener (twice for the lawn), van fulls of rubbish carted away (£X/hour for cleaning etc), broken items being removed. I've seen the management man called out because one lot locked themselves out - and a week later again because the key entry system wasn't working.

This one was let out to cover the owner's (smallish) mortgage while he's gone away for a couple of years and I bet he's into loss still.

Lights and heating are left on 24/7, furniture's left outside (in the rain). It's a holiday let - all people are different and when on holiday some people have a "no worries" attitude.

Conrad

Also - I spent years looking for a touristic property that would be a genuine investment and only found one location (abroad). Forget capital growth the point is your income in relation to outgoings. The outgoings WILL be much higher than you think.

Vacationers on thier once annual holiday want everything perfect and working - most people hugely underestimate the costs. You will experience an unending lists of replacement purchases (toaster, bottle opener, towells, carpets, glasses, shower thermostat, shower curtain, soap dish, cuttlery, garlic crusher, cloths, frying pan, microwave etc etc etc) as guests break / take / lose whats there.

These types of 'investment' are not in fact investments, but lifestyle purchases. People get wrong footed as they hear someone say something like 'I paid £60000 in 1980 and now it's £250,000' but they forget the constant costs, the mortgage costs, the loss of savings return on the £30k deposit.

By all means buy a lifestyle property but it is highly unlikely it will be a true investment. As I say I found only onr such location / development afters about 3 years searching where the returns make it a worthy investment and I do not mean Spain (too much competetion / mass over supply / too seasonal / not enough on ANY development to draw the 'any season' crowd).

miketv

Don't worry I'm fully aware of the downsides and costs with regards to owning a holiday let. As you say- it's not going to be the greatest way to invest and make millions, however it is a way to enjoy what to most people in employment would be their earned income sitting in a company pension that for someone of my age won't be able to touch until we are 70 odd probably, and instead having a place to escape to and enjoy. I know it will be subject to CGT, but at least it will still have a value. Thats the plan anyway. Anyway, let's not move off point here into the pros and cons of holiday let ownership...

The point of my post is trying to find a lender in the current market, seeing whether other people have had a similar experience, or have any advice on where to turn. I wonder if anyone has had an experience recently of buying a property with a "holiday use only" restriction? I imagine the local Council would not easily change the planning permission and therefore lift the restriction? Has anyone had experience of trying to get these sort of restrictions lifted?

mynameisdave

I recently went for an interview with a company that specialised in sub prime finance lending, mainly motor finance. They have a sister company / the parent company has another arm that specialises in finance for the leisure sector such as caravans, motor homes and holiday homes.

Negative side is that when researching the arm of the business I was in there was... ample. google results for complaints about them. Google atou completed to [company name] complaints there were so many.

I'll PM you the company name if you want but I suspect if you have a 30% deposit I don't think a sub-prime lender is the type of route you want to go.

PasturesNew

You could go and view some new holiday restricted places - and ask the sales people how the finance can be arranged.

Where I live there are streets of them empty... I could probably have a sales person for an entire day just by suggesting I might buy one.

Or, you could download the information from land registry of those already sold, to find out the name of the lender (if they have one).