The world of buy to let mortgages in London and making investments in property can prove to be incredibly beneficial to some, allowing for landlords to earn further profits from the properties in their portfolio. Beyond just your standard type of buy to let mortgage, however, there are a variety of other buy to let mortgages available.
One of the variations that is more closely related to a buy to let mortgage, is a let to buy mortgage in London. There are also HMO’s, which are houses of multiple occupation and holiday let mortgages in London. The latter is to be the focus of this article.
A holiday let in London is another form of a buy to let in London, that will see landlords renting out a home temporarily to both tourists and visitors, during their travels to that location. Tenancies are usually done as short-term ones and there will generally be a few of these throughout the year.
Because of the nature of the holidaying industry, there is more than likely going to be a few periods during the year where the holiday season dies down a little bit, meaning you won’t always have a consistent income. This can mean mortgage lending criteria will be much stricter.
As is the case with any mortgage, you will of course need to make sure that you match up against the strict mortgage lending criteria of a holiday let mortgage in London, before your mortgage applicant can be approved. Criteria can vary between different mortgage lenders, though typically it is the same criteria throughout.
For the most part, you will find that you need to have at least a 25% deposit, a minimum income per year (in addition to the rental income you will be making), a rental income that can help to cover your monthly mortgage payments (with further margins to meet) and also holiday home insurance.
The latter will help to cover you in the event of any possible booking cancellations or loss of income you could be faced with. Holiday homes are typically seen as a much higher risk investment purchase, as it is incredibly likely that there will be periods when you are not making a great deal of income, if any at all. As such, interest rates will more than likely be higher.
At the end of the day, this is all about how you weigh up the positives and negatives of holiday let mortgages in London. They are able to help provide you with additional income, with the bonus of you being able to charge a premium for school holidays or peak seasons, due to the high demand.
In addition to this, you may also have the possibility of deducting expenses from fully furnished holiday homes, though this can vary. Some landlords may find that they have certain tax benefits, though there will be specific criteria for them to meet and we highly suggest speaking with a qualified tax advisor in London to learn more.
Further to this point, whilst you could potentially charge more during the peak seasons, you could find it a bit of a challenge to even buy a property at all. Tourist hotspots will also come with premiums on price, though if you can look past that, you would also likely make more rental profit from those locations.
Interest rates can be a negative for some, as you will most likely be paying much more on interest rates. Depending on the amount of properties you have to your name, you could also find that you are paying a lot more on stamp duty tax as well. When you combine this with running costs and general maintenance, it soon all adds up.
Once again though, this will all depend on the location of your property and the amount you are charging on rent, especially in peak seasons. In more popular times of the year, you may be able to lessen the impact of these factors. Still, when there are lengths of time where no income is being made, you do need to make up the shortfall.
Speaking of having periods of downtime, whilst financially this is a negative, it can contribute to a truly eyebrow raising area of holiday lets in London. This being, that you can use it as a holiday home for yourself, when not fully booked! This is contrary to a buy to let mortgage in London, where you cannot live in your property at all.
Really it all comes down to what works best for you at that point. Sure there are many different costs to think about, though if you play your cards right, the profit could make it all worth it and leave you with a place to go and spend some much needed “me-time” when the property is not being occupied.
A standard buy to let mortgage in London will be for a rental property. That property is typically offered to long-term secure tenants. Tenancy lengths are, as a general minimum duration, between 6-12 months, with individual terms that will be set by a landlord. The amount you are able to borrow will depend on potential rent, as opposed to your income.
On the flip side, holiday let mortgages in London are usually only intended for the short-term. A standard holiday let mortgage tenancy is around a month at a time and can lead to fluctuations in your income, as with holiday lets there are usually off-peak seasons where securing a short-term tenancy can be a little challenging.
In order to figure out roughly how much you are able to borrow, they will be looking at a few different things like potential for rental income more in-depth (reviewing the various lettings seasons), as well as taking a look at your personal income.