Holiday let finance – investment warning to borrowers

BEXLEYHEATH, U.K. - Nov. 8, 2013 - PRLog -- People looking to buy a UK holiday let are being warned not to get “scammed” and end up with the wrong type of mortgage. Doing so could see them end up having to pay the outstanding loan monies back immediately, as well as potentially being classed as a fraudster.

This stark warning is issued by Norman Phillips, Director at mortgage specialists, Holiday Let Mortgages (www.holidayletmortgages.co.uk). He says: “UK holiday lets are increasing in popularity and no wonder – a recent press article* highlighted how weekly holiday rents in tourist hotspots such as Bath are double what landlords can charge for long term lets in the same area.

“What investors looking for a mortgage need to be very aware of, however, is that if they are buying a property to use as a holiday let, they need a special holiday let mortgage. Using mortgage products that are not specifically designed for that purpose, such as Buy to Let or residential mortgages, or using lenders who do not allow holiday letting or impose limits on the period in a year that holiday letting is permitted, can be dangerous”.

Mr. Phillips explains that if an investor does not have the correct mortgage type, and this is then discovered by the lender, they could be forced to pay back the whole loan amount immediately. Not only that, but the consequences are even more far-reaching:

“If you have a holiday let but are using Buy to Let products or residential second home products, you will invalidate any insurance cover, even if you have bought specialist holiday let cover. The reason given by insurers is that you will have obtained finance by deception, which is fraud.

“Failing to disclose this may extend beyond the insurance on the holiday let property to invalidating all other insurance that you have, including private house and car. The consequence of fraud can be costly, as those involved would have their details entered on the National Fraud Database, effectively excluding them from a number of activities including obtaining loans, other credit and insurance policies”.

Mr. Phillips explains that recently he has had several desperate new clients asking for help, where an unscrupulous or inexperienced mortgage broker had arranged a home loan for their holiday let, only to find that it was the wrong type of mortgage. He adds: “Avoid mortgage brokers who may try to arrange loans for you using unsuitable products or lenders without your knowledge, having not disclosed full use of property to those lenders. While the broker will end up with a nice slice of commission for arranging your loan, the affect on you could be very financially detrimental.”

He recommends that holiday let buyers use the services of a broker who has expertise in the industry – and that existing holiday let owners check their existing mortgage to make sure it is appropriate.

Ends

*Mail on Sunday (http://www.thisismoney.co.uk/money/mortgageshome/article-...)