Posted on 9 May 2010 by Dave McGovern
We are considering buying a UK holiday home. Our main home has just been valued at 450-470k and we have outstanding mortgage of 175k. We would be looking to spend up to 200-250k on the holiday home, we may rent it out at times but would not want to rely on this. Our household income excluding bonuses is 150k and we could access 30-35k savings. Are there any options for us in the current financial market or would we be better saving more capital first?
This is an interesting question because the answer is going to depend on whether you really intend to let the property out or whether you may just occasionally let friends and family use it when you aren't.
In the latter situation, there are Lenders who will consider a residential mortgage application for a second home and will base the amount they lend on your income. If you intend to let the property, then the number of Lenders who will consider an application will be reduced and the amount of rental you can command on a seasonal basis is going to affect the amount you can borrow.
Either way, you will typically be able to borrow up to 75% of the property value meaning you need to find a deposit of between £50,000 - £62,500. This can come from your savings or by releasing some of the equity in your main home or a combination of both.
I recommend that you speak to an independent mortgage broker about your situation. They will be able to give you an idea of the costs of each approach and how to structure the transaction to your best advantage.
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