The Council of Mortgage Lenders (CML) spells out the principal difference between standard residential mortgages and buy to let mortgages. The former are designed for owner occupiers (and have the protection of regulation provided by the Financial Conduct Authority), whilst the latter are used to fund what is a business enterprise.
When assessing the affordability of each type of mortgage, lenders consider an owner occupier’s income from employment or self-employment, but in the case of a buy to let mortgage, assess the income from rents against the cost of servicing the mortgage and maintaining the property.
So where does that leave you if you own a second home but also its use as a holiday let, or if you are occupying the property you own, but let out converted outbuildings of the main home as holiday lets? In other words, where do you go for a mortgage for a mixed use holiday let?
A special mortgage for a special case
A mortgage for mixed use or multi-unit holiday lets is a special case, calling for a specialist solution – a specialist mortgage.
It is the type of mortgage which might not be considered suitable by every lender, if only because of the wide variety of potential set-ups involving both owners as occupiers and owners as landlords. Where the need for special consideration arises, these are the lenders who tend to deal only with straight forward requests for either a residential or a buy to let mortgage.
What is needed instead is a case by case tailored approach by a mortgage specialist capable of scouring the market for those lenders who are content to advance such loans – at competitive rates of interest.
Any deal offered of course needs to take into account the affordability and security of a mortgage on a property that is going to serve as the borrower’s home, but also consider the financial viability of that part of the property responsible for generating an income from rents received from holiday lets.
One of the major plus points in running a holiday let business, of course, is that rents are typically paid in advance, so providing the kind of security on income that may be absent from standard, longer-term tenancies of buy to let property.
It might also offer the opportunity for you to enjoy the best of both worlds. There is a strong possibility, for instance, of your wanting to retire in a peaceful, scenically attractive part of the country – precisely the kind of location that holiday makers are also likely to be looking for a temporary, short-term let. With the help of a mixed use or multi unit holiday let mortgage you may be able to seize the opportunity for buying your retirement home in just such a location and also take advantage of its potential for holiday lets.