Owning a home is one thing. Owning a holiday home is quite another altogether! Talk about an incredible luxury that you will undoubtedly get plenty of use out of over the course of the next few years. If owning a holiday home is a goal of yours, you may be wondering how to finance it. Below is everything that you need to know.
What are my financing options?
You will generally be faced with a decision to choose between a holiday home-specific mortgage or taking on a second mortgage in addition to the one on your main residence. The type of mortgage that you apply for and your options in general will depend heavily on whether or not the holiday home that you intend buying is situated in the UK. If it is located abroad, the process is quite a lot more complicated.
How you intend to use your holiday home will also factor in the type of mortgage that you can apply for. For example, if you plan to purchase a holiday home for your own personal use (i.e., you don’t intend to rent it out), then you will be able to apply for a residential mortgage. This will be straightforward enough. However, the criteria are likely to be much more stringent than when you applied for a mortgage on your main home. You are likely to have to put down a much more sizeable deposit (usually around 25%) and may be slapped with a higher overall interest rate.
If, on the other hand, you plan to purchase a holiday home and rent it out on a regular basis, you will need to apply for a different kind of mortgage known as a holiday-let mortgage. This type of mortgage is most commonly provided by small building societies, and you will be required to put down an even larger sum for your deposit. A minimum of 25% – 40% is usually insisted upon.
Mortgages for holiday homes abroad
If your dream holiday home is located outside of the UK, you will have two options available to you:
- Apply for a mortgage from a UK bank
- Apply for a mortgage from a bank in the country that the property is located
The ‘right’ decision will depend heavily on what the investment requirements are for the property in that particular country. In many cases, you may require a substantial deposit as you are a foreign investor.
Can I apply for a holiday home mortgage if I have bad credit?
In some cases, this may be possible, although you will need to evaluate if this is a wise decision based on your personal circumstances. Websites like www.themoneyhub.co.uk can help you to establish whether or not you are eligible to apply and, if so, help you to find the best possible deal.
Why invest in a holiday home?
There are countless benefits to buying a holiday home. Not only will it bring your family many years of joy and possibly end up saving you money in the long run, but it will also act as a hearty sum of extra income in the instance that you intend to rent it out.
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