Finance Monthly April 2020 Edition

a regular mortgage, however, several key differences should be considered if a buy-to-let property interests you. Buy-to-let is appealing to more buyers due to the low-interest rates for savings and strong demand for rental properties from young people who are struggling to get onto the property ladder themselves. However, some points to consider before choosing between a holiday home and buy-to-let are: • The fees tend to be much higher – most mortgages for buy-to-lets require deposits of between 25% and 40% • Interest rates on buy-to-let mortgages are usually higher • Most BTL mortgages are interest only and you must repay the original loan in full Why are holiday homes on the rise? Holiday homes have many positives pushing their favourability, such as ROI and growing staycation popularity. In addition to this, holiday homes can be rented out for far more money than you could a normal rental property due to the high turnover. This means that over the year you could generate a much bigger income depending on the amount of business taken on, leaving a holiday home much more flexible than a buy-to-let mortgage. Furnished holiday lets are also taxed differently than buy-to-lets. They are classed as a business which means you can still claim tax relief on mortgage interest which is appealing to the mass market. In contrast, that relief is being reduced on buy-to-let properties, which is something to consider within the ever-changing market. INVESTMENT - HOLIDAY HOMES VS. BUY-TO-LET MORTGAGES 57 www.finance-monthly.com