With many mortgage lenders resuming physical valuations on properties in England, the property market seems to be breathing back into life. Coupled with the majority of housebuilders returning to building sites, there is renewed hope for whatever stage of property ownership you’re at.
As the property market returns gradually there may be delays from lenders and valuations as they look to catch up with any backlog. Given the changing environment at present, the best thing you can do if you have any questions is to contact us, and we’ll be able to take you through which options suit you best.
With 7.5m people being assisted by the government furlough scheme*, mortgage lenders have had to re-evaluate how they are assessing this form of income. Roughly 60% of lenders, including many high-street brands, will accept furloughed income where it can be evidenced. Another 30% of lenders will consider furloughed income on a case-by-case basis, and the remaining 10% will not accept any furloughed income on a mortgage application. With stances changing daily in the current climate, it’s best to contact our advisers to gain the most up to date information for your circumstances.
If you are a DIY investor one of the biggest concerns when managing your own Pension, ISA or investment is ending up with unbalanced portfolio. If your money is managed by a financial adviser, most will update the balance of your investments appropriately to your change in circumstances.
Why is this important during these challenging times? The coronavirus crisis has left many portfolios looking precariously unbalanced. Making the necessary changes yourself can be tricky, so many people will want to find a financial adviser to help them build a portfolio that is ready for the coming recovery.
Post-coronavirus, it is more important than ever to ensure you get expert help with your finances. Speaking to an expert independent financial adviser can give you more peace of mind.
If you’re looking to generate a second income, buying a holiday home could be the perfect investment option for you. Not only will you own a holiday cottage for yourself and your family to escape to, you could make a healthy profit by renting it out to others.
If you’ve never managed a property before, you’re probably unsure on the practicalities of it all and how much money you could earn. Here we answer some common holiday home investment questions and offer advice on how you can maximise your income.
Why do so many homeowners choose to let out their homes?
The UK is becoming an increasingly popular place to holiday. Recent Visit Britain statistics show that spend on UK staycations was over £23 billion in 2017, which was 3% more than the previous year. Here at Sykes, we saw bookings increase by 24% in 2017 and this trend looks set to continue.
With changing tax rules on buy-to-let properties putting investors off the long-term let market, short-term holiday lets are becoming an increasingly attractive option.
If the thought of running a holiday let business feels like too much like hard work, you don’t have to do it all yourself. Many reputable holiday letting companies have teams of experts on hand and will provide assistance with everything from the advertising and marketing of your property to managing guest changeovers and any general maintenance that may be required.
What are the best options for raising capital for a holiday let?
Many people choose to use a mortgage to help with the purchase of a holiday let. Holiday let mortgages differ from standard residential mortgages or that of a long-term rental property.
Some holiday let owners raise the necessary funds by releasing capital from either their current mortgage or their pension. Currently, you can release up to 25% of your pension tax-free once you’re over 55.
If you’re unsure on the best option for you or would just like some advice, contact one of our property specialists who will help or point you in the right direction.
What types of mortgages are available for holiday lets?
When you buy a holiday let, you’ll need a specific mortgage aimed at those offering short-term lets to holidaymakers. There are fewer providers offering this type of mortgage than those that offer standard mortgages and there can often be restrictions on, such as the maximum loan-to-value (LTV) a provider will offer.
There are also some tax benefits with holiday let mortgages. For example, you can currently offset the interest on your mortgage against the rental income you make. So, if your property made £12,000 in one year and the interest on your mortgage for that year was £9,000, you would only be liable to pay tax on the £3,000, according to your own tax rate.
What Return on Investment (ROI) could you expect from a holiday let?
If you’re wondering how good of an investment holiday lets can be, we’ve crunched the numbers based on our actual booking data to help you find the answer.
On average, our owners earn around £18,000 annually through bookings, but what you could earn will depend on a variety of factors, such as your property’s location, what type of guests you accommodate, property features, number of rooms and your pricing strategy.
Best locations for a holiday let business
If you’re open to choosing a property based on its earning potential rather than having your heart set on a specific location, here are some top tips to help.
In our in-depth review of the UK holiday let market, the Sykes Staycation Index 2018, we found that coastal properties and those in National Parks earn 10% more than other properties in the same region, and that some regions earned more than others.
Our data from 2017 revealed that Dorset was the top-earning location in the UK, with four-bedroom properties making an average of £43,000 in gross income a year, while the Lake District came second, with four-bedroom properties earning an average of £28,000 annually.
If you’re always on the lookout for the latest trends, there are some destinations in the UK that are becoming increasingly popular. Our data suggests that some of the fastest growing regions at the moment are on the South Coast, in the Midlands and in southern Scotland.
When you’re choosing the location of your holiday let, think carefully about who you are trying to attract – for example, do you want to attract families in Cornwall or outdoor lovers in the Lakes? However, if you’re planning on visiting your holiday home with family and friends too, don’t forget to factor in your journey time to the property as well. Likewise, if you plan on managing changeovers and maintenance to reduce costs, you’ll need to be able to travel to and from the property easily.
The rise in UK staycationers
Figures from Visit Britain in its Great Britain Tourism Survey show that 2017 was a great year for the staycation market. The number of overnight trips taken in the UK in 2017 was 120.7 million and overall spend was up by 3%.
In its Travel Trends Report 2018, ABTA also revealed that 72% of British holidaymakers took a break in the UK in 2017 with the UK predicted to be the most popular holiday destination with Brits in 2018.
How to maximise your income
When you’ve bought your holiday home, there are ways to boost the income you get from it. For example, we noticed some clear trends in 2017 that could help you generate more revenue.
Our customers are clearly looking for a little luxury as properties with hot tubs, on average, earn 51% more than those that don’t. And holidaymakers want to stay connected while they are away – last year we saw properties with Wi-Fi earning up to 20% more than those without it.
Home comforts are also attractive to travellers in the UK. For example, Brits love their pets and offering pet-friendly facilities could boost your earnings by up to 10% a year, while installing a welcoming log burner could increase your income by a similar amount.
The limit for ISA contributions in the 2016/17 tax year is £15,240. In April 2017, your ISA allowance will rise to £20,000 a year.
You can only open one Cash ISA per year, but it is possible to transfer to another Cash or Stocks and Shares ISA.
If you withdraw money from your Cash ISA, you don’t reset your annual limit. For example, say in one year you saved up to the Cash ISA limit and withdrew £1,000. You can’t top up that £1,000 immediately – you’ll need to wait for the next tax year. From April 2016, ISA providers can offer a flexible facility which will let you withdraw and replace money from your ISA, provided it is done within the same tax year. Not all ISA’s will let you do this and you should check that your ISA has this function.
If you want to change providers – for example, if you find another ISA that is offering a better interest rate – then you must ask your new provider to sort the transfer in order to maintain the tax free status of your savings.
Although your current provider is required to let you to transfer your ISA to a new account, your new provider may not accept ISA transfers. Make sure your new supplier will let you transfer your ISA before agreeing to switch.
Your current provider may charge a penalty for transferring. Check for any fees or charges to make sure transferring is still worthwhile.
You can earn tax free interest on your savings as with a standard ISA. These new ISAs are limited to one per person rather than one per house. You can’t contribute to a Cash ISA in the same tax year.
You won’t need to pay any tax on the interest you earn. But be aware that if you are a 16 or 17 year-old and the money in your ISA was a gift from a parent, they might have a tax bill under the parental tax settlement rules.
Not all Cash ISAs offer great interest rates. Shop around until you find a good deal.
Beware of teaser rates that are high for a short period of time before dropping off to a low level. If you find that you’re no longer earning a competitive interest rate, look for a higher rate Cash ISA to transfer into.
With instant access Cash ISAs you can withdraw money when you want to. With fixed-term Cash ISAs, you’ll get your money back at the end of the period you signed up for (‘the term’). Some accounts allow early withdrawals, but there may be a penalty. Your provider may also charge penalties and fees if you transfer your Cash ISA to another provider.
A new ISA was introduced to help first time buyers save towards the cost of buying their first home in autumn 2015. Savers can make an initial deposit of £1,000 when they open a Help to Buy ISA and then receive £50 for every £200 saved up to a maximum of £12,000. The tax break is capped at £3,000.
Cash you put into UK banks or building societies (that are authorised by the Prudential Regulation Authority) is protected by the Financial Services Compensation Scheme (FSCS). The FSCS savings protection limit is £75,000 (or £150,000 for joint accounts) per authorised firm.
Cash ISAs are available online, through a branch or over the phone depending on the product and provider.
1. Check your credit report to make sure everything is accurate and up to date. Some credit referencing agencies, such as Noddle, will allow you to do this for free, or for a charge of £2. If any of the information is incorrect tell them as soon as possible to have it investigated.
2. Try to avoid applying for credit in the six months prior to making a mortgage application. It could look like you are struggling financially and can have a negative impact on your credit score.
3. Since the new mortgage affordability rules in April 2014, there has been closer scrutiny on not only your credit history but also your budgeting and financial planning. It’s worth trying to save a little every month and finish every month with a surplus.
4. Lenders can take into account your available credit limits, and are likely to view low ‘utilisation’ as an indication of low risk. So try to keep the balances on your card accounts as low as possible.
5. It is vitally important to meet any agreed current repayments you have and paying a little more than your agreed minimum card repayments will not only reduce your balance more quickly but will also be a positive factor on your credit report.