November 18th, 2016.
Investment Across Oceans: Financing a Holiday-Let Property Abroad
If you’ve got the travelling bug and love to explore the world, then you’ve probably considered investing in a holiday home before.
The great thing about a holiday home is that, when you’re not using it, it can be rented out to other holidaymakers or locals and provide you with a decent income to help recoup the cost of the mortgage. Plus, once the loan is paid off, any rent is cash in your back pocket.
And, what if you bought more than one property abroad?
This all sounds great and, if you’ve done your sums, this could be a great money-making venture for you. But, how are you going to finance this master plan?
Financing Buy-to-Let Property Abroad
As this property will not be your primary residence, you are not eligible for a residential mortgage for this purchase. Instead you will need a specific kind of buy-to-let mortgage. However, many high-street banks or building societies are less likely to offer mortgages on holiday lets as they are deemed to be of higher risk.
Why? Well, unlike regular buy-to-let properties, holiday homes are unlikely to have long term tenants. Instead, renters will likely stay for a week or two at a time, making high vacancy rates more likely – especially during down season. As a result, your income is not guaranteed and therefore you’re more likely to default on payments.
There is also the issue of the fluctuating currency values against the pound when you’re considering purchasing abroad. Another major event, like Brexit, could cause property values to plummet.
Those finance providers who do provide buy-to-let mortgages for holiday lets are likely to run extra checks to ensure repayments can be afforded whether the property is rented out all the time or not. If you have any other loans or mortgages this is likely to greatly affect the amount of additional funds you can borrow.
It’s also likely that a larger deposit will be required. We’d recommend raising at least 25% of the value in order to get a competitive mortgage deal. Generally, the more you can pay upfront, the better your chances of getting the loan approved.
Other Factors to Consider
As well as the original purchase of the property, you’re likely to need to make regular transfers to cover expenses such as property maintenance bills or letting agency fees.
It may benefit you to set up a bank account in the country you intend on purchasing. You can then make an online transfer to this account using a reputable currency broker in order to make international money transfer simple.
Need Help Finding a Commercial Mortgage?
If you require the services of a trusted independent financial broker to find you a buy-to-let mortgage for purchasing one or more properties abroad, contact our experienced team today.
We’re experts in portfolio and development mortgages, and are happy to help you find a competitive deal. Call 02920 766 565, and you could be putting your feet up and enjoying the view from your holiday home very soon.
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