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More mortgage options for landlords branching out into holiday lets

Growing numbers of landlords are adding holiday lets to their portfolios. As a result, many lenders are getting on board with more mortgage options to choose from.

More people than ever are expected to opt for “staycations” in the UK this year as foreign travel remains challenging. For landlords with the option to use their property as a short-term let, it is likely to be an even more appealing option right now. As a result, more mortgage companies are releasing new products to meet this market demand.

Roma Finance, which specialises in bridging loans as well as buy-to-let, has expanded its range. It is now offering a holiday let and serviced accommodation tracker mortgage on a five-year term. The loan is available at a maximum 70% loan-to-value (LTV), with an arrangement fee of 1.95%.

Rates include 4.89% for 65% LTV, and 5.39% at 70% LTV. These rates come with the addition of the Bank of England base rate, which is currently at an all-time low of 0.1%.

According to managing director Scott Marshall, the firm has seen a rise in enquiries recently for short-term let products.

“Holiday lets can provide property investors with another income option rather than the buy-to-let route which has seen a lot of changes in recent years,” he commented.

“Monthly rental income and yields can be higher than many other forms of property investment as renters are looking at the location of the property and using it to visit local beauty spots and landmarks.”

Open to first-time landlords

Another company that has entered the holiday let market is Monmouthshire Building Society. The lender has released a host of new products for individuals and joint applicants. There are also a number of options available for limited company landlords and even first-time landlords.

Like Roma’s products, Monmouthshire’s mortgages allow landlords to let properties using a range of methods, including Airbnb.

Monmouthshire offers rates up to a maximum of 75% LTV. Customers can borrow up to £1 million per property or £3 million in aggregate. Rates include two years fixed at 3.35% for 75% LTV with a £499 product fee on a new purchase, with the same rate and fee available for remortgage with assisted legal fees and one free standard valuation.

Dan Goulding, product development manager at Monmouthshire Building Society, said: “These products are an ideal solution for anyone looking to enter the holiday let market – including first-time landlords – to add to their existing portfolio or remortgage an existing holiday let property.”

Short-term lets vs buy-to-let

Deciding whether to make your rental property into a short-term holiday let or a long-term buy-to-let will come down to a number of factors. Each individual’s situation will be different, and there are a number of pros and cons to weigh up.

In terms of monthly yields, short-term lets can often win out. Many holiday lets make more in a week than a buy-to-let will make in a month. Liverpool, while being home to the best buy-to-let yields, also offers the best short-term rental yields, too. Landlords there can make as much as 27.2%, according from figures from Portico Host.

Aside from the higher yields, demand for UK holiday rentals has been on the rise in recent years. Particularly now that foreign travel may be less appealing for many due to the coronavirus outbreak, thousands of UK holidaymakers are expected to flock to the country’s short-term rentals.

When looking at furnished holiday lets, there are also certain tax advantages to take into account. You can read more about this here.

There are downsides, though, too. Holiday lets tend to be more seasonal and therefore less reliable. They may spend more time sitting empty than a traditional buy-to-let. As such, they can also be more time-consuming. They must be advertised, marketed and managed consistently, although there are many companies that will do this for you.

At BuyAssociation, we connect property buyers and investors with UK-wide opportunities, direct from the developer. Many of our properties come with the option for short-term as well as long-term lets. Sign up for free for more information, or get in touch with us directly.

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