Restrictive Lending on properties with Holiday Letts

Helcatt

We are looking to buy a property with a couple of holiday letts - I was surprised to be told that even though we are not including the income of the letts for borrowing purposes - only my husbands income, that we'd have to get a commercial loan.

Not believing this I contacted my current lender and asked them - we are only looking for a LTV of around 15% - yes that's right - we only need a very small amount of borrowing, we can borrow this easily against my husbands earnings but they said no. Shocked, I asked if we were not planning to use them as letts could we borrow then? They said, get this - if we could remove or knock down or change the planning category of the 'letts' they may consider it - what?! So remove the 18K pa income and we become a better risk?!

Has underwriting gone completely mad?!

I still can't believe that lenders will not consider a residential mortgage- surely one of them out there must be able to see the sense in this?!

Thrugelmir

Helcatt wrote: »

Has underwriting gone completely mad?!

I still can't believe that lenders will not consider a residential mortgage- surely one of them out there must be able to see the sense in this?!

Holiday letting is a business. A residential mortgage is for buying a home.

Underwriters have merely returned to lending sensibly.

Helcatt

If I were planning to run it as a business I would not buy one that costs over 600K with a turnover of 15K!!

This is a HOME... just because it has 2 letts in the garden - we are not asking for them to lend on the letting income just on our earnings - just like a normal residential mortgage.

Sorry, I disagree with you - telling me to 'knock the letts down' to get the mortgage is STUPID UNDERWRITING.

kingstreet

If you ask the wrong question of the wrong person...

You are looking at a semi-commercial proposition, not a residential mortgage. A "normal" lender will simply not want such business as the implications on repossession are just too out of the ordinary for them.

I suggest talking to an independent or whole market broker for your options. Although, TBH I tend to think you'll get a product which your own bank will beat by .5% just to get the business...

Thrugelmir

Helcatt wrote: »

Sorry, I disagree with you - telling me to 'knock the letts down' to get the mortgage is STUPID UNDERWRITING.

I doubt that the underwriters said that.

The holiday lets form part of the property you are purchasing both as buildings / accomodation and income. So have a value.

Without them the property would be valued much lower.

Itismehonest

I do think it's making things overly complicated, though.

Someone has to have a normal residential mortgage for the house & arrange a commercial loan/mortgage for the cottage(s) at the same time. There is often only one set of deeds covering the whole property because in times past these places were considered to be "a home with income".

I'm a potential seller of exactly this sort of property.
It would seem the only buyers worth considering will be cash purchasers.
It's just another reason why people will end up staying in a property when they'd happily downsize