Mortgages - Buy 2 Let v. Vacation Rentals

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    Mortgages - Buy 2 Let v. Vacation Rentals

    On verge of organising a Buy to Let interest only mortgage at a pretty good rate but had a last minute rethink. May now do vacation Rentals in the property we're buying as the location lends itself to that and there's the Tax Advantage of Mortgage Interest being an allowable deduction from the Taxable income. However, Mortgage Brokers advises that normal Buy 2 Let Mortgage will not be suitable and we'd have to swap to a specialist product for Vacation Rental which is more expensive. I'm surprise they're bothered where the income comes from as long as the Repayments are made and I'd have thought not having a Tenant, with some Tenancy Rights, in place was a benefit to the lender rather than a reason to be more expensive? Anyone else come up against this?

    #2
    The advices given by your various brokers is indeed correct, there are a number of lenders who will consider holiday type let’s and the rates are higher reflecting the higher risks associated.
    When you make an application for a conventional Buy to Let you declare that the Letting will be on an AST for an absolute minimum period of six months and a maximum of 2/3 years ( depending on the lender). If you fail to adhere to this agreement you have committed mortgage fraud by virtue of a false declaration in order to obtain a pecuniary advantage. The lender then has the right to require their loan to be immediately repaid, furthermore your personal details will be registered on the Hunter System which shows what you have done, this will make it almost impossible to secure any further mortgage irrespective of whether it is for a BTL or Regulated Homeowner Mortgage. This alert stays permanently on the system unlike CCJ’s or Defaults on the Credit Agencies.
    I don’t intend to criticise lenders regarding their criteria or support your assessment that such restrictions are unfair , please just accept that normal BTL loans require either an AST/ Company Let or Housing Association Let on a 3/5 years.
    It is also worth pointing out that the surveyor acting for any lender accepting Holiday/AirBn B must confirm that the property is in an area where there is a strong demand for such accommodation.

    Apologies for appearing blunt but as a former lender of over 43 years and a specialist broker in BtL I have very strong views on any attempt to circumvent the rules of any lender.

    Comment


      #3
      Originally posted by Halfbob View Post
      I'm surprise they're bothered where the income comes from as long as the Repayments are made and I'd have thought not having a Tenant, with some Tenancy Rights, in place was a benefit to the lender rather than a reason to be more expensive?
      Mortgage products are based on risk profiles which are regulated.

      The risks associated with a tenancy - where the occupants are usually long term - and the risks associated with a holiday let (or a mortgagee's residential home) are different.

      Nothing in what you have said surprises me at all.
      Don't try and game the system to "save" some money - mortgage lenders pay a lot of money to spot "misaligned" products and property use.



      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        To put your enquiry my database shows the following lenders who indicate that they will consider HolidayLet/AirbnB
        YES LENDERS
        • Harpenden
        • Teachers
        • Vernon BS

        REFER LENDERS
        • Furness BS

        If you check these lenders out and go to Products & Criteria you will understand the rate structure. BtW have a look at the Leeds Bs I suspect that they might consider

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          #5
          Originally posted by loanarranger View Post
          Apologies for appearing blunt but as a former lender of over 43 years and a specialist broker in BtL I have very strong views on any attempt to circumvent the rules of any lender.
          Absolutely no problem with that, and thank you for taking the time to reply in such detail.

          I'm comfortable with regard to the surveyor acting for any lender confirming that the property is in an area where there is a strong demand for such accommodation. If there wasn't I would, and still could, go down the normal Buy to Let/AST Route.

          I'm just waiting for the Broker to come up with some Vacation Rental Mortgage Illustrations to determine if the Tax advantages of Vacation Rental outweigh the increased Mortgage Interest Rates & Product Costs. All a bit of a guessing game as Occupancy Rate will be key.

          Comment


            #6
            Thanks for replying in such a professional manner.

            If the short term lender indicates limited or zero demand having paid valuation and possibly non refundable applications fees, then your broker will need to research the BtL market and source a conventional lending option.
            Please note that with effect from August 1st FCA Rules changed in terms of advice given , whilst ostensibly it is aimed at Regulated Mortgages Networks are extending such advice to BtL , this means that the broker has to seek the lowest price mortgage available but if recommending a more expensive product there has to be justifiable reasons for such recommendations so beware of the quality of advice being given.

            Comment


              #7
              Don't forget that London already restricts holiday letting to 90 days a year (without planning consent) and it is likely other areas will follow with similar restrictions.

              Comment


                #8
                Originally posted by Section20z View Post
                Don't forget that London already restricts holiday letting to 90 days a year (without planning consent) and it is likely other areas will follow with similar restrictions.
                Interesting, thanks for that. It would very much be a "summer season" and other School Holiday type Vacation Property, so that wouldn't be disastrous. Other than the fact that if it's available to Let for less than 210 days per year you can't claim Mortgage Interest Tax Relief. But then again, if it's available to Let for MORE than 140 days per year it becomes subject to Business Rates which MAY be beneficial compared to residential Council Tax but could leave me open to having to pay Business Rates for Water etc..! So many "if's & but's"!

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