This question is one that we are frequently asked, and the answer very much depends on how the potential borrower intends to use their holiday home.
Typically, if the property is a true holiday or second home, that is or will be used only by the owners, their friends and non-paying guests, a minimum of 15% deposit is required.
So, up to 85% LTV (loan to value) with affordability based on personal earned income, with deductions for expenditure, including existing mortgages that are not fully supported by rent.
If a property is a holiday home that an owner currently lets or intends to let to paying guests as holiday accommodation, then lenders will class this as a full holiday let property or business.
In this case specific holiday let mortgages, with lending criteria that allows for short term-letting are available on much better terms and at better LTVs than most other commercial mortgages.
Typically, a minimum deposit of 25% is required, subject to an affordability assessment based on projected or actual holiday let rental income. Properties with usage restrictions to holiday let only, can now be financed at 75% LTV, whereas quite recently the max LTV available was 60%.
In addition to cash in hand, lenders specialising in holiday let mortgages, will generally accept a deposit that is provided from capital raising on a customer’s main residence, by way of re-mortgage, re-mortgage of BTLs or other commercial property, or a family gift providing that it’s non-returnable and from close family.
Currently, loans up to £1.5m are available at 75% LTV, subject to affordability.
Until recent times, large loans would often require that the subject property be a trading business, with formal accounts so that affordability could be easily established and not too speculative. However, a loan of this size is now available with 25% deposit, on a projected rental basis, at very good rates.