What your mortgage broker wishes holiday let owners knew
Spilling the tea with mortgage expert John.
If you run a holiday let, or you are thinking about buying one, your mortgage is almost certainly the single most expensive product you will ever buy. It is a huge financial commitment, a big monthly overhead for many hosts, and something that can shape the success, or failure of your business for years to come, which is why I am always slightly surprised at how many people try to muddle through it alone.
I actually met John, a mortgage expert and holiday let mortgage specialist, many years ago when we were both living in Hong Kong (he played rugby with Frazer, my other half).
Fast forward to today and we have both moved back to the UK, grown up a bit, started businesses, and John has ended up arranging no less than four mortgages for me, so when it comes to holiday let mortgages and property finance, he is very much my go to guy!
I asked John to tell us “What would your property finance specialist tell you if they were not afraid of hurting your feelings?”.
The primary feedback is simple: don’t assume you know what you want. The role of a mortgage advisor is to hunt out the best deals, but it is also to advise you, given your specific circumstances, what might be best. Mortgages are incredibly individual and what worked for someone in a Facebook group, or “a mate down the pub”, most likely has absolutely nothing to do with your situation. Two hosts could be buying very similar cottages and end up with completely different mortgage products. As John explained, “It’s really to do with you as a person, what your strategy is, what your goal is, what you want to do in the future.”
Your mortgage options depend on things like:
• your personal income
• how many properties you already own
• whether you are buying in your own name or through a limited company
• how much deposit you have
• your long-term plans for the property
That is why specialist advice is SO crucial.
Holiday let mortgages are not the same as buy-to-let mortgages
People often assume that a standard buy-to-let mortgage will do the job. It won’t. Holiday let mortgages are specialist products designed specifically for short-term rental income and the way lenders assess them is different from a normal rental property. A lender needs to know that the property will be used as a holiday let, and the mortgage product has to allow that, otherwise you can end up in a situation where you are technically breaching the terms of the mortgage. As John put it: “If you get a normal buy-to-let mortgage and then run it as a holiday let, you’re effectively committing mortgage fraud.”
Now I know that sounds dramatic, but lenders are becoming much more aware of short-term letting and they do check platforms like Airbnb and holiday letting websites. The solution is incredibly straightforward…
If you are running a holiday let, make sure you have a holiday let mortgage that is designed for that purpose.
The lenders you have probably never heard of
Many of the best holiday let mortgage products are not offered by the big high street banks, they tend to come from smaller building societies and specialist lenders. Mortgage advisors have access to companies and rates that the rest of us simply don’t. During our conversation he asked me a question. Specialist lenders are often the ones offering the best products for holiday lets. You may never have heard of them, but a broker who works in this space every day will know exactly which lenders are active and which products suit different situations.
John explained: “The majority of the time the best products are with lenders people have never even heard of.”
What matters is not the name of the lender. What matters is whether the mortgage works for your circumstances.
Why a good broker asks slightly intrusive questions
Working with John the first time, I was surprised how many questions he asked, and not just about the property, but about my life. He asked whether we planned to have children; at the time I remember thinking that was a slightly unexpected question during a mortgage conversation but of course it made complete sense. A specialist broker is not just looking at the purchase itself. I promise they aren’t being nosey, they are just trying to understand your long-term financial picture.
Your plans for things like:
• family
• future property purchases
• retirement
• income changes
All of that can influence which mortgage structure makes sense. As John explained “We want to know what your goals are. Is this a retirement plan? Is it about short-term cash flow? Or is it about building equity over time?”
That level of strategic thinking is incredibly valuable.
A tip that can save a lot of money
One of the most practical pieces of advice John shared was about remortgaging is that many people leave it far too late. His recommendation is simple, start looking at your new mortgage around six months before your current fixed rate ends. This allows a broker to secure a rate early and if rates improve before the mortgage starts, they can move you onto the better deal, if rates rise, you are protected because the earlier rate is already secured. It is like an insurance policy against interest rate fluctuation, and it is something I have followed on every remortgage he has arranged for me.
When a mortgage broker tells you not to buy
Because brokers see so many deals, they quickly recognise when something simply does not stack up financially. As he said: “People become very invested in properties… but sometimes the numbers just don’t work.” This really resonated with me because it is something I see as well. People send me a Rightmove listing and say “Look how beautiful this is”, and they are already imagining the bedding and the welcome hamper but when you look closely, the property might have no parking, or the layout does not work for guests, or the numbers just simply do not make sense. A good adviser should be willing to say so.
Why I recommend John
People often ask me for recommendations for mortgage brokers who understand holiday lets. John is someone I always recommend because:
• he specialises in property finance
• he understands holiday lets specifically
• he has arranged several mortgages for me personally
• he is extremely straightforward when something is not a good idea.
If you are buying a holiday let or remortgaging an existing one, speaking to someone who understands the market properly can save you a huge amount of time and stress. Click below to find out more about John and his team here. You won’t regret it.
And if you do get in touch, mention that I sent you!
🎙️If you’d like to hear more incredibly helpful tips on holiday let mortgages from John, be sure to listen to the podcast episode in full. Click the link for your chosen platform below to find the episode.
Fancy a freebie?
My step 1 guide is completely free and, if you’re thinking about holiday letting, Airbnb or buying a holiday cottage in the UK, it is designed to stop you making the classic early mistakes when setting up your holiday let. You can access it now here:
Kay x
A quick note
I have an affiliate relationship with Inca Financial, which means I may receive a referral fee if you choose to work with John from using my link. I only ever recommend services I personally use and trust, and John is someone I have worked with for years.