What is the difference between buy to let and holiday let?
The differences between a buy to let (BTL) mortgage and holiday home mortgage can sometimes be a little confusing.
Here is a quick overview of the difference between the two forms of borrowing.
Buy to let mortgages
Buy to let mortgages have been around for quite a while now. They are mortgages that enable you to buy a residential property (house/flat etc) that you can then let to tenants.
The tenants will occupy the property as their main residence. Usually a formal letting agreement called an Assured Shorthold Tenancy (AST) will be used. The rent will be a fixed weekly/monthly amount that will be reviewed from time to time.
You can employ a letting to help look after the property or you could choose to do this work yourself.
When applying for a buy to let mortgage the lender will look at the applicants and also the property and its suitability as an investment. A rental calculation will be used where the proposed rent determines the possible mortgage amount.
Location is generally not a factor for the lender providing that the valuer agrees with the purchase price/value and the expected rental income.
Mortgages can be set up as repayment or interest only. The interest rates can be fixed, tracker etc.
You will need to have buildings insurance in place and contents cover if you provide furnishings.
The mortgage agreement will state that the property should be let to paying tenants and that you cannot live in the property yourself. It is possible to change a buy to let property into your main residence but you will need the lenders consent to do this.
You can deduct the running costs and certain maintenance costs from the rent income when assessing personal tax. However, you cannot deduct the full amount of mortgage interest anymore. Please seek tax advice regarding how this may affect you
