Second Homes and Holiday Lets

What You Need to Know About Mortgages

Owning a second home or a holiday let has become a popular aspiration for many people in the UK. Some dream of a bolthole by the coast, while others see holiday rentals as a way of generating extra income. But when it comes to financing these properties, the mortgage process is not the same as buying your main home.

Here is what you need to know if you are considering taking this step.

Second Home Mortgages

A second home mortgage is used when you want to buy another property for your own use, rather than to rent out. This might be a weekend cottage, a city apartment for work, or a future retirement home.

Key points to be aware of:

• Higher deposits: lenders often require a larger deposit, sometimes 25% or more.

• Stricter affordability checks: you will need to show you can cover both your existing mortgage and the new one.

• Stamp Duty: You’ll usually have to pay 5% on top of SDLT rates if buying a new residential property means you’ll own more than one.

Holiday Let Mortgages

If the plan is to rent out the property to holidaymakers, you will need a holiday let mortgage, which is different from both residential and buy-to-let products.

Lenders typically require:

• Proof that the property is a genuine holiday let (furnished and available for letting a minimum number of days per year)

• A higher deposit, often 25–30%

• Evidence of expected rental income to support affordability

Holiday let mortgages are assessed differently from standard buy-to-lets because the rental income is often seasonal and can fluctuate.

Potential Benefits

• Extra income: renting out a holiday property can generate a useful revenue stream

• Personal use: you can also enjoy the property yourself outside of rental periods

• Capital growth: second homes and holiday lets may increase in value over time

Challenges to Consider

• Running costs: cleaning, maintenance, insurance, and managing bookings can all add up

• Tax implications: second homes and furnished holiday lets are taxed differently, so it is important to understand the rules before committing

• Market risk: rental income may vary depending on location, demand, and the economy

Holiday Lets vs Buy-to-Let

It is important not to confuse holiday lets with buy-to-let properties. Buy-to-let mortgages are for longer-term rentals, while holiday let mortgages are for short-term stays. Using the wrong mortgage type could breach the lender’s terms and create problems later.

Final Thought

Whether you are looking at a second home for yourself or a holiday let to rent out, the mortgage process is more complex than for a main residence. Lenders have stricter requirements, and there are extra costs to consider. Getting professional advice before making a decision is always a good idea, especially as tax rules and lending criteria can change.

For more information, please get in touch.

The FCA does not regulate some forms of Tax planning, Buy to let mortgages and Holiday Let Mortgages.

We provide mortgage advice only. For guidance on tax matters, we recommend consulting a qualified tax adviser.