Short Guide to Holiday Property Mortgages

Many people dream of having that holiday property whether in home territory or overseas. Having sufficient capital to buy it outright is an enviable situation. If this is not the case, then you may find that you need to enquire about holiday property mortgages.In one sense, looking for such a mortgage may prove very similar to applying for a basic ‘primary residence’ mortgage. There are a number of banks and other financial institutions offering mortgages and several may be willing to discuss a mortgage for a second holiday property.The principles might vary slightly depending upon whether or not the second property is in your country of residence or not.Firstly, let’s consider the ‘home country’ properties. When applying, the bank will probably use the same basic criteria as for a primary mortgage. They’ll wish to understand whether or not the borrower can afford the repayments on the mortgage and to do this they will normally need to see some evidence of your income and expenditures- this could also include any existing ‘primary residence’ mortgages you may have in place.Some lenders may have special products and conditions for holiday home properties that are also a commercial concern – such as a small hotel or an apartment primarily to be used for rental purposes.If the lender believes that the loan is affordable and that the property is correctly priced etc, then the loan is likely to be advanced as normal.The position may be a little more complicated if the property is overseas. The reason for this is that under the terms of a standard mortgage, the lender takes a legal charge over the property – in other words if the borrower defaults on repayments the lender has a legally enforceable right to repossess and sell the property.These rights can be difficult or sometimes impossible to enforce overseas so some lenders may prove reluctant to advance on that basis.Fortunately, many of the major banks and lenders have overseas subsidiaries and associations that they may be able to refer you to and holiday home mortgages could be available from those sources.Another possibility for overseas holiday property mortgages is the local bank or lending organisation. In many countries, local banks and lenders are sometimes willing to offer mortgages to foreign nationals who wish to buy local property for holiday home purposes. Once again, they will want to assure themselves that the property is worth the sales price and that the borrower has regular income sufficient to pay off the mortgage in accordance with any agreements.Property buying overseas can be a little fraught due to a lack of familiarity with the local systems and possibly a language barrier. It could be useful to secure the aid and advice of a recognised expert in the local market such as a solicitor etc.It’s worth noting when buying a holiday home overseas that many banks may not be too concerned if the property is let out and run as a semi-commercial activity when you’re not using it. Typically, this is more of an issue for the home and contents insurance company.Although this is generally good news, it is not to say that overseas lenders will advance mortgages for holiday homes based upon projections of income that the home may generate! Most overseas lenders will only advance a mortgage based upon your existing ‘normal’ income and expenditure in your home country. They may well be intuitively uneasy about mortgage advances based upon speculative income.For many people, getting a holiday property mortgage doesn’t have to be too demanding a task providing a sensible approach is adopted at the outset – particularly when buying overseas. As always, shopping around for deals and advice may be advisable.