Holiday Home Mortgages

Buying a holiday home, whether a seaside retreat, countryside escape, or simply a property for family getaways, can be fantastic. But getting finance for a second house, in the UK or abroad, can be challenging. Here, we’ll explain how holiday home mortgages work, how much you can borrow, and where to find the best rates.

Can you get a mortgage to buy a holiday home?

Yes, it’s definitely possible to get a mortgage to buy a holiday home, both in the UK and abroad, but the process and requirements can vary depending on the location and type of property.

How holiday home mortgages work

A holiday home mortgage works much like a standard residential mortgage, but it’s assessed as a second property. Lenders will look at your overall finances, existing mortgage or debt commitments, and how you intend to use the new property.

Because it’s not your primary residence, lenders treat it as a slightly higher risk, meaning you might need to save a larger deposit and pass stricter affordability checks.

You’ll also need to factor in additional costs, such as higher stamp duty for second homes, council tax, and insurance. For holiday homes abroad, other costs may need to be factored in.

Mortgages for holiday homes in the UK

If you’re purchasing a second property in the UK for personal holiday use (and not a buy-to-let), you’ll usually need a second home mortgage or holiday home mortgage. These are similar to standard residential mortgages but often come with stricter affordability checks and slightly higher interest rates.

Lenders will assess whether you can afford repayments on both your main house and the holiday home, and you may need a larger deposit to offset some of the perceived risk. The home must be primarily for personal use or family holidays, not a rental property; otherwise, you’d need something like a holiday let mortgage.

Mortgages for holiday homes abroad

If you plan on buying a holiday home in Spain, France, Portugal, Ireland, or further afield in somewhere like New Zealand, it’s worth understanding that getting a Spanish holiday home mortgage can work differently from, say, a French holiday home mortgage.

Local property rules vary, and you’ll need to speak with a broker who specialises in the region you’re interested in. The process is often more complex because most mainstream UK lenders don’t offer mortgages for properties abroad. So, you’ll need to work with a lender with a presence in another country.

Usually, for overseas mortgages, the lending criteria is stricter, especially if you earn foreign currency (a haircut of around 20% can apply to account for currency fluctuations), and you need to consider things like taxes and legal requirements. Speaking with a specialist holiday home mortgage broker is crucial.

Eligibility criteria for these mortgages

Lenders will look at several key factors before approving a mortgage for a holiday home:

• Property type and location: The property must be suitable for year-round living and standard construction. Unusual, remote, or non-standard construction properties might require specialist lenders.

• Deposit and LTV: Most lenders require a deposit of at least 15% to 25%. Higher deposits, resulting in a lower loan-to-value (LTV) ratio, can help you access better holiday home mortgage rates.

• Income and affordability: You’ll need to prove that you can afford both your main mortgage and the second mortgage for the holiday home. Some lenders may require a minimum income level, and if buying abroad, your foreign income may not stretch as far as it would in the UK.

• Credit history: A strong credit profile can help. Certain types of bad credit may limit your choice of lender, but there are specialist bad credit lenders. For holiday homes abroad, you may need a bank account or a credit history in the specific country.

• Property use: The mortgage terms usually require that the property is for personal use and not rented out on a long or short-term basis (perhaps on sites like Airbnb). Certain lenders may allow you to let a second property out for short periods.

Getting a mortgage for a holiday home

The process will vary depending on the location and your situation, but here are some simple steps explaining how to get a mortgage for a holiday home:

1. Speak to a specialist broker: Not all lenders offer second home or holiday home mortgages. A specialist broker can identify which lenders are comfortable with this type of property and ensure you meet their criteria.

2. Get your application ready: Your mortgage advisor will help you get the necessary basic documents together, and details of your current mortgage or property. For overseas homes, you’ll also need translated legal documents and possibly a local valuation.=

3. Check affordability: Ensure your disposable income comfortably covers both mortgage payments and ongoing costs, including insurance, maintenance, and appropriate taxes. Remember, foreign income (pounds) may not stretch as far abroad.

4. Apply with the right lender: Your mortgage broker will help you prepare your application in the best way and then introduce you to the most suitable lender for your holiday home mortgage, offering the most competitive rates for your situation. 

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Calculating how much you can borrow

Using a holiday home mortgage calculator isn’t usually the most accurate approach. The inputs tend to be rigid and not capable of capturing all the relevant details required when lenders work out how much you can borrow.

Typically, most lenders will let you borrow around 4 times or 4.5 times your salary. However, some are more conservative for a second property as lenders want to see that you can comfortably afford both mortgages, even if interest rates rise. And, your salary multiple isn’t the only factor in the decision.

For an accurate figure based on your personal finances and the specific property and location, it’s best to speak with a mortgage broker who can assess your circumstances and ownership goals to provide tailored borrowing estimates for your holiday home, but you can use our calculator below to get a rough estimate.

UK lenders offering second mortgages

Some high street lenders and banks may offer mortgages for holiday homes used for personal purposes. Here are a few examples of popular lenders that may consider applications:

• Nationwide: Are open to second home mortgages for personal use, with up to an 85% LTV. However, you will need both mortgages with Nationwide, and the second property must be for personal use and not rented out.

• Halifax: You can borrow up to a 75% LTV with a Halifax holiday home mortgage, but you must only own one other residential property. You can let the property out for up to 4 months, and family members can stay without an official tenancy.

• Santander: Although Santander doesn’t specify details about holiday home mortgages, you may be able to take out additional borrowing up to a 90% LTV of your home’s value (with a £5,000 minimum loan). You must not have declared bankruptcy or be subject to an IVA.

Lenders like HSBC and Barclays have international footprints but may not offer holiday home mortgages abroad. Because eligibility criteria differ between lenders, a specialist mortgage broker can help identify which lenders are most suitable for the holiday home you want.

Holiday home mortgage rates

Interest rates for holiday home mortgages are usually slightly higher than standard residential rates because of the increased risk to lenders. The exact rate you’re offered will depend on your deposit, credit history, income, and whether the property is in the UK or overseas.

If you’d like to compare the latest holiday home mortgage rates or accurately check how much you could borrow, you can use our free online comparison tool or speak with a specialist broker for a personalised quote.

Why choose Money Helpdesk for your holiday home mortgage?

We specialise in helping people secure mortgages for holiday homes across the UK and abroad. Whether you’re buying a cottage in Cornwall or a villa in Spain, our expert brokers can help you find the right lender with the most competitive rates.

Here’s why people across the UK choose us for their holiday home mortgage:

• Access to brokers who specialise in holiday homes

• Free initial chat with no obligation to proceed further

• Our brokers are 5-star rated on leading review sites

• Introduction to lenders offering bespoke holiday home mortgages

If you’d like to compare current holiday home mortgage rates or speak with a broker about your property ownership goals, you can get started here.