Not all lenders will advance a mortgage to buy a second (or holiday) home, and in any event you will have to show that you can afford not just this mortgage but any other that you might have. If your aim is to let out the property the whole year round, then the better choice of mortgage might be a buy-to-let mortgage which will be treated more as a business proposition, with the amount you can borrow being based on the estimated rental income. The most critical decision is whether you're planning to buy a holiday home in Britain or overseas.
Home
If it's the former, you're certainly more likely to find a willing mortgage lender for the purchase of a second home in Britain. Naturally, you'll be looking for a good location for a holiday home, and this becomes all the more important if your aim is to let it out for as many weeks of the year as possible. Rental considerations will also help you choose the number of bedrooms for your holiday home. Since the majority of holiday lets in Britain are booked by families, you'll be best off with a 2 or 3-bedroomed house than a 1-bedroom flat, for example. 85% of holiday bookings are satisfied by 3-bedroomed properties, according to industry statistics. When it comes to financing the purchase, there may be tax advantages available depending on the type of mortgage you choose. You should seek independent financial advice to help you make this decision.
If you plan to hire a letting or management agent, remember that their fees are likely to set you back some 15-30% of the rents due. Agents will also be there to remind you about maintaining adequate insurance on your holiday home (more of that in a moment), which will need to include public liability cover up to at least andpound;1 million and will cost you between andpound;200 and andpound;450 per annum.
andhellip;and abroad
It's a whole different ball-game if your holiday home is overseas. Securing a mortgage with a UK lender on a property overseas is going to be a lot more difficult, though not impossible. You will probably need to find a mortgage lender with operations in the country where you intend to buy. Nonetheless, be prepared for the typical 'ceiling' on your maximum borrowing potential to be no more than 40% of your net income, after current expenditure on your existing home mortgage, debts, bills and the foreign mortgage repayments. Interest rates on foreign mortgages can be higher than in Britain and are usually variable. Some countries - Croatia and Thailand, to name but two - do not permit mortgages to be held by foreigners at all.
Of course it will be very important to take independent advice and secure the services of an English-speaking lawyer locally. Consider engaging one of the specialist companies in the UK who can not only arrange an overseas mortgage for you but guide you through the whole process of purchasing property overseas. Many of these specialists have local legal contacts or partners in other countries.
Holiday home insurance
You know you need it, but actually getting the holiday home insurance (to cover buildings, contents and public liability) that offers everything to put your mind at ease can be easier said than done. Many insurers are averse to the risks associated with rental properties and the possibility that they will often be unoccupied for long periods at a time. This is true if your holiday home is situated in Britain, but becomes even more acute if the property is located overseas, where questions of risk and liability can be subject to particular local conditions.
Once again, there are specialist insurers who can arrange holiday home insurance policies underwritten in London and written in English, with terms and conditions that reflect local circumstances. Furthermore, if it comes to the worst and you need to make a claim, this can be done through an English-speaking claims handler. So if having read this you are fired up to buy your very own holiday home, let's just recap what you need to do..
- Decide whether you are you going to buy at home or aboard. Look at what the aim of buying this property is - for pleasure, investment, or a bit of both; or a long-term let?
- Look at your finances and use our quick and easy service to see how much you could borrow based on your financial circumstances
- Then draw up a budget to ensure that you could comfortably afford the property, not forgetting to include insurances, letting agents' fees etc
- If all the figures add up, then the real fun can startandhellip; house hunting!

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Article Submitted By: Kate Tee
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