It may be that the idea of purchasing property with a view to subsequently using it for holiday letting is one that appeals.
There’s no reason why it shouldn’t and it might prove to be a potentially lucrative investment for you. However, it is important to be aware of one or two potential issues that may arise in the domain of holiday let mortgages.
You will need a specific mortgage
Assuming that you will be looking for some sort of funding through a mortgage, it is important to be aware of the need to make sure that you have the right type of mortgage for the nature of your planned use of the property.
Mortgage providers typically differentiate between things such as:
- long-term landlord;
- and holiday let mortgages.
The reasons for that are many and varied but what is important is that you have a perfect match between the type of mortgage you obtain and the way you are planning to use any property purchased with it.
Where mortgage versus property use mismatches can arise
This might happen in circumstances where:
- you have accidentally or intentionally failed to declare to your mortgage provider that you intend letting out your property for holiday purposes;
- you have applied for and obtained one type of mortgage but have subsequently decided to change the use of the property concerned and have failed to declare this in advance to your mortgage provider. For example, some mortgage providers may specifically prohibit the use of a property for holiday let purposes;
- a mortgage broker has intervened on your behalf in order to obtain funds but has intentionally or unintentionally failed to correctly communicate between you and the mortgage funds provider, exactly what purposes you plan to use the property for; etc.
The consequences of failing to use the correct type of mortgage
If you are beginning to believe that this is just a question of bureaucracy and red tape then it might pay to think again.
From an insurance viewpoint, obtaining an incorrect type of mortgage in terms of your planned use of a property may be at the very minimum seen as a breach of contract or more seriously as fraud.
The least that might arise, as a result, is that a future claim may be rejected out of hand. Perhaps even more gravely, it might also put at risk any other forms of insurance cover you hold, and you may find yourself noted on central databases as being someone who obtained insurance cover by making false declarations.
That might make it very difficult for you to obtain insurance in future or significantly increase the premiums you may have to pay – if you’re fortunate enough to be able to obtain cover at all.
Not only that, but your mortgage lender could insist you repay your whole loan immediately.
There are a number of different types of mortgage product including those specifically aimed at holiday let situations.
Make sure that you understand the differences between these types of mortgage and have applied for the correct one for your particular set of circumstances. If you are in any doubt, it might be sensible to speak to a specialist provider of holiday let mortgage funding.