24th August 2018
Buying a Holiday Home – What, where and how?
Do you want to own a slice of the seaside? If you harbour dreams of buying your very own holiday home, follow our expert guide. We help you decide what to buy where, and how to finance it.
Live In or Let Out?
With increasing government restrictions on mainstream buy-to-lets, sales of holiday homes are booming. They’re regarded as a trade rather than an investment by HMRC. For tax purposes, mortgage interest costs are deductible from any rental income and capital allowances are available to tackle wear-and-tear.
However there are strict rules on what qualifies as a holiday let. According to HMRC the property must be available for at least 210 days a year, and must be let commercially as a furnished holiday home for at least 105 days in this year. You can’t count the days you let to friends and family at zero or reduced rates. Check the terms of any lease, as it may prohibit sub-letting.
What to Buy?
Even if you don’t plan to let your holiday home immediately, it makes sense to future-proof your choice. Most period cottages are small and face a lot of competition in the rental market. Unless your cottage really stands out from the crowd, you’d be better off looking at a larger property. These command comparatively higher rental prices and perform well throughout the year. Ensure there’s some capital growth too, so be honest about the location. Is it about to benefit from a new or improved road, railway line or airport? Or is it already popular with house prices ‘at the top of the market’? Speak to estate agents, but also get the views of local people.
What’s the legal situation?
At St Ives in Cornwall a ban on second homes is in force, and similar measures could be put in place in other in-demand holiday destinations. According to a spokeswoman for the Land Registry, there’s no ‘absolute prohibition’ on the sale of properties as second homes in Areas of Outstanding Natural Beauty in England, National Parks or designated Rural Areas in Wales. But there may be restrictions that allow only people who live or work locally to purchase certain properties.
How do I buy?
If you need a mortgage, you’ll require a deposit of about 25 per cent. Fewer lenders offer holiday let mortgages than buy-to-let finance. Other lender requirements’ such as the rental projections, might be stricter. Refinancing your principal family home to raise the purchase price might be an option for you too. This is where we can help – we offer specialised advice in mortgages for holiday homes.
What is essential?
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