Buy-to-let versus holiday letting
Which is best really depends on how much work, maintenance and time you’ll put in. If it’s a profitable income you’re after, holiday letting is fast overtaking the buy-to-let market.
With many buy-to-let landlords turning to holiday letting to cash in on the increase in UK tourism and unlike holiday let owners, landlords are no longer able to deduct the interest they pay on their mortgage from the rental income they receive to the taxman.
Not only is there greater flexibility and potential profitability when owning a holiday let, but there is also the added benefit of being able to make use of the property yourself at times.
Mortgage and finance terms
Holiday let mortgages differ quite substantially to those for buy-to-lets. The majority of buy-to-let mortgages have conditions attached to them, with a minimum term of six months for tenants. Letting for a shorter period than this will break the terms of the mortgage.
As more investors are buying holiday let properties, more lenders are joining the market, however, there are still not many products available and because of this, we’re finding investors are turning to specialist brokers such as ourselves for support.
The size of the deposit clients will need to secure a property will often depend on the mortgage product chosen, but it is likely to be at least 25% of the property value, as ever the larger the deposit, the better the terms of the mortgage can be. Interest rates are typically higher than a buy-to-let mortgage, holiday let owners can claim on the wide range of tax reliefs which are no longer available to buy-to-let landlords.
With an increasingly tough tax regime in recent years, it’s really no surprise that so many are turning to holiday lettings instead.
