Mortgage for second home. Is this just a fantasy?

loveka

We want to buy a second home in the UK. The plan is to rent it out for the summer season, and live in it for most of the winter.

The house we are looking at is 250k. We would have a deposit of 50k. It would have a rental income of about 800 a week, for 12 weeks worst case scenario.

It will be in my name only, I earn 30k- self employed but with 10 years steady income. I am 50 though...

Our main home is jointly owned and has 300k equity. We pay £530 a month mortgage.

We also have a buy to let property with 150k equity, in my partners name.

Is this at all possible or is it total pie in the sky? I would happily sell the buy to let, but my partner isn't very keen on that option! Thanks.

MortgageMamma

Hi there

Based on what you say it sounds possible, but there is not enough information in your post to say for sure.

How much mortgage outstanding on your residential?
How much mortgage outstanding on your buy to let?

Does your wife work? What is your occupation? Do you owe money to any creditors? How much rent to you get for your buy to let?

loveka

Our residential is a endowment mortgage, so 125k left. Endowment currently worth 75k though, and on track to pay full amount in 9 years.

Buy to let mortgage is 160k. Rent is £1220 a month

We have no debts, but partner doesn't work. I am self employed. Thanks for your reply.

loveka

Any advice anyone please?

Thrugelmir

With only £30k of annual income which isn't even guaranteed. Do you consider it wise to saddle yourselves with such a sizable amount of debt?

MortgageMamma

He also has buy to let income of 8280 a year (not included repair costs etc in that) - but still its a big commitment and probably not affordable in the long term. The potential income from the holiday let could ease things a bit, but it has to remain affordable even when not rented out - its difficult to judge without knowing the location/type of property/how much per week it would rent for plus how many weeks for own use

Brock_and_Roll

Given the debt problems / headaches that your partner and yourself have had just a few years back, do you really want to "gear yourselves up" again?


There is obviously the risk of voids on holidays lets as well as the significant costs of insurance, cleaning, maintenance etc etc.


Assuming an average interest rate of 5%, you would actually be underwater (before costs) even if you achieved a full 12 week letting at £800pw.


One thing that is unclear is that if you are living in this property for the winter, who if anyone is living in your main property?


I live in an area where there are a lot of (expensive) holiday lets - it goes without saying that it is a very capital intensive game, and the most common phrase is "asset rich, cash poor"!!!


As it happens, I am considering renting my property out in the winter months (and living in spain) and returning in the summer months - but I will not do this until my mortgage is paid off.

Thrugelmir

MortgageMamma wrote: »

He also has buy to let income of 8280 a year

Only if the property is let or the tenant doesn't default. Unless the source of the income is unencumbered. Always take the pessimistic view if you are the money lender.

OnTheRun

It may be possible, but it is not straightforward and so I would suggest you seek the help of a broker.

There are a number of issues as you propose.

1. A conventional BTL is not usually suitable for a holiday let, or for a property that you plan to live in.

Having said that, if you could were to bend the truth a little and get a conventional BTL, then the lender doesn't really care if you do end up living in it part of the time. But they will have issues about the type of tenancy agreement you are giving to others.

It depends how honest you want to be.

Getting suitable insurance cover may also be not so easy for what you plan, but an insurance broker should be able to find you something.

2. In simple terms the figures don't work as either a BTL or as a second home.

3. Your age may be a factor

4. You (with your partner) - do have equity in other properties that may make the numbers work, but that is compliacated by who currently owns what, and that you want this property in your sole name.

5. What do you plan to do with your main home during the winter when you plan to live in this new home?
That may cause issues too with both your current lender and your insurance.

See a broker (with your partner) who is prepared to take a flexible approach (assuming you are) and see if it's doable

loveka

Thanks for your replies. Food for thought indeed.

Things have been tough in the last few years, as my partners business went bust. I suppose I now want to start living again, and this would offer a way of doing that.

We are now thinking of swapping the buy to let for the holiday home , i.e. selling one and buying the other. The mortgage on the holiday home would be lower than on the current buy to let. But it is the riskier option I know. We would also have to pay capital gains and stamp duty. We would not live in the holiday let in the winter, just spend lots of time there. I think our idea to live there full time for 6 months was probably not a good one!

So on paper it looks like a mad idea. But...I really want to do it as it offers a better lifestyle.

Thrugelmir

Special tax rules apply to holiday lets so worth reading up.

https://www.gov.uk/government/publications/furnished-holiday-lettings-hs253-self-assessment-helpsheet/hs253-furnished-holiday-lettings-2015