Although you might own property already, there are two important and specific considerations you may need to give to any investment in a UK holiday let.
The two features specific to holiday lets are the related issues of mortgages and insurance for the property.
Mortgages for holiday lets
When raising funds for the purchase of your property, it is important to remember that mortgages for holiday lets are different to those you arrange for either an owner occupied residence or for a buy to let property.
An owner occupier, of course, intends to live in the mortgaged property as his or her principal residence; a buy to let property, on the other hand, is occupied by tenants – typically on an assured shorthold tenancy – for relatively long periods of time, on a more or less continuous basis.
Buy to let mortgages account for some 14% of all new mortgage lending, according to the Council of Mortgage Lenders (CML) – but buy to let mortgages do not reflect the use to which your holiday let is likely to be put.
Instead of tenants on relatively long-term leases occupying your property, it is likely to be let mainly to holiday makers who probably stay for no longer than two or three weeks.
Your holiday let property may also remain available for your own or family members’ use on a private basis, when not let to holidaymakers.
Therefore, in many ways, mortgages for holiday lets might be seen as falling somewhere between the categories of owner occupied residential mortgages and buy to let mortgages.
The special status of a holiday let property makes it crucial that you arrange the appropriate specialist mortgage, based on full disclosure of the use to which the property will be put.
If you knowingly apply for a different type of mortgage, yet intend to use the property as a holiday let, this is in effect mortgage fraud. If discovered by your mortgage lender, they have the right to immediately call in the loan.
So that you arrange the mortgage most appropriate for a holiday let, you might want to consult a specialist holiday let mortgage broker, experienced in providing this kind of loan and able to identify the most competitive rates of interest.
Very similar arguments apply to the kind of insurance you need to safeguard the building and the contents of your holiday let.
Any insurer needs to know the use to which you intend to put your property – the use helps to define the risks and perils you are asking the insurer to cover after all.
It is just as important, therefore, that you arrange purpose designed insurance for holiday let property, rather than either standard home insurance for the owner occupier or buy to let insurance for the landlord of buy to let property.
The particular use of a property as a holiday let, for example, might influence not only the risks to which the building and its contents are exposed, but also the various liabilities faced by the owner of the property.
If you arranged inappropriate insurance cover, you may find any subsequent claim rejected by your insurer – and therefore suffer a potentially severe financial loss.