A beginner’s guide to holiday letting

With the property market booming and the desire for staycations high, if you’ve ever dreamt of owning a holiday let or thought about letting out your second home to holidaymakers, then now could be as good a time as any to take the plunge.

But what do you need to consider when buying a holiday letting?

Do you need a specialist mortgage?

And what taxes and insurances will you need to think about?

What is a holiday let and how is it different to other property ownership?

Holiday letting is defined as renting out a property for short periods lasting no more than a few weeks at a time.

This differs from a buy-to-let property where a rental term would be 6 or 12 months at a time.

They are also defined differently from a holiday home, which is a property or second home that you own and stay in yourself, and don’t let out to others.

I want to invest in a holiday let, where do I start?

Once you’ve determined the location and type of property you’re after then, unless you are buying outright, you’ll need sound advice on finding the right mortgage to buy the property.

Holiday let mortgages are different to those for residential or buy-to-let properties as the risk is different to the lender. So, you need to be sure you’re looking at the right type of product.

You’ll need a larger deposit than you would for a normal mortgage, around 25-30% is the minimum, and you’ll find deals are fewer and rates higher.

If you already have a second home with a mortgage then you may well need to change your existing mortgage if you want to let out the property to holidaymakers.

What other costs do I need to think about for holiday lets?

Aside from kitting the place out with everything from sofas and beds to bowls and blankets, there are some other cost considerations to factor in.

The good news is that there are tax benefits to owning a holiday let. But you’ll need to make sure you meet the required criteria.

Furnished holiday lets that are let out for at least 30 weeks (210 days) a year are considered as a business rather than an investment by HMRC. And therefore, you can offset your mortgage interest against your profits.

As a business you’ll be subject to business rate property tax instead of council tax on the property, but you may be able to claim this back. To fully understand your personal tax position, you will need to speak with a tax adviser.

You’ll need to think about insurance costs too.

Special holiday home insurance policies cover the building and its contents but with the added risk of you not being in the property as its owner. You’ll also need to consider public liability insurance to protect against any accidents or damage, and potentially cover for legal expenses too.

So, if you’re considering taking the first step into holiday letting as an investment opportunity, or you want to think about changes to a second mortgage then we can help you to navigate the options available to you. Book a 15-minute discovery call with one of our team by calling our freephone mortgage advice line on 0333 005 0333.

Your home may be repossessed if you do not keep up your mortgage repayments.

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