Holiday let mortgage (with no deposit)

m33r4

I have paid off my mortgage and my house has full equity. Can I get a holiday let mortgage for an investment property using my house as the deposit/collateral?
Thanks. 

ArbitraryRandom

Yes, basically you would get a mortgage on your existing property (±25% of the purchase price). 

Your affordability would be assessed based on the total repayments, and you should also remember that your second property would be on a buy to let mortgage. 

This looks like a decent guide for the detail: https://www.expertmortgageadvisor.co.uk/remortgage/second-mortgages/second-mortgage-deposit/

eddddy

ArbitraryRandom said:

...and you should also remember that your second property would be on a buy to let mortgage. 

I don't know if that was a typo, but it's not correct.

As the OP suggests, the second property needs to be on a 'Holiday Let Mortgage' - not a 'Buy to Let Mortgage'.


@m33r4 - but I would agree that you need to take out a mortgage on your current property to cover the deposit on the new property, and then take out a 'Holiday Let Mortgage' on the new property, to cover the remainder of the purchase price. (Subject to affordability checks etc)

A residential mortgage will be cheaper than a holiday let mortgage - so the more you can borrow on your current (residential) property, the less interest you'll pay. (But you might get less allowances against tax - others might confirm that.)

m33r4

eddddy said:...

A residential mortgage will be cheaper than a holiday let mortgage - so the more you can borrow on your current (residential) property, the less interest you'll pay. (But you might get less allowances against tax - others might confirm that.)

What sort of tax relief would that constitute please?

Pardon my ignorance but do you mean take a residential mortgage to buy the holiday home?

kingstreet

Residential Remortgage Route

You would remortgage your main residence, so you would have a residential mortgage. The term capital raising is used to describe the process where this would be used to fund an investment property purchase.

Your income would determine the amount borrowed, not the investment return.

Investment Property Route

Use the above to raise only the deposit for the investment property.

Then take a holiday/BTL mortgage for the remainder. This will be based on the rental income usually calculated over the lettable "season" for the location.

General

You can claim 20% of the interest you pay as a tax credit and your running costs of the second property are 'offsettable' against the rental income for tax purposes.

Don't forget second property stamp duty will apply - an extra 3% in England.

A decent broker would be best-placed to work through this with you to find the best overall approach.

sheramber

Holiday let mortgage (with no deposit)

You are not likely to get a mortgage without a deposit. Are you thinking to  use the value of your house instead of a deposit.

I don't think  mortgage lenders work that way.

anselld

kingstreet said:

You can claim 20% of the interest you pay as a tax credit For

For FHL the cost of finance can still be deducted in full.

ArbitraryRandom

eddddy said:

ArbitraryRandom said:

...and you should also remember that your second property would be on a buy to let mortgage. 

I don't know if that was a typo, but it's not correct.

As the OP suggests, the second property needs to be on a 'Holiday Let Mortgage' - not a 'Buy to Let Mortgage'.

Sorry, yes thank you for the correction. Typing on a train without due care and attention