Adverse Credit Issues Threaten to Halt a Holiday-Let Investment

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Even experienced property investors can struggle with unforeseen financial pressures. Often, these pressures can lead to borrowers seeking out specialist finance for the first time.

Say an experienced landlord has a portfolio of both personal and BTL properties across the South West of England – a key holiday-let market. While their overall portfolio has performed well historically, the client encountered short-term financial issues during the previous 18 months following a void period on one investment property, combined with increased living costs.

As a result, the client had missed several mortgage payments on a residential mortgage. This prevented them from attaining finance from mainstream lenders for a prime holiday-let opportunity.

With no real options in the mainstream market, they turn to us for support. We can work with borrowers who have missed payments in their backgrounds, so long as we see evidence that the issue has been addressed.

In this case, the underwriter pores through the borrower’s details and sees that no repossession action was ever taken, and the borrower could clearly evidence that the issues were temporary and had since been resolved. Furthermore, all their mortgage payments were now up to date.

With this addressed, we could turn our attention to the investment’s credentials. Forward-looking holiday let income projections, alongside evidence of comparable local occupancy rates, demonstrated that the property would comfortably service the debt. Furthermore, the borrower planned to refinance onto a mainstream holiday let mortgage once a trading history had been established, using improved affordability and a clean payment record as the exit.

Seeing that following our loan many high street banks would be willing to provide long-term capital, we’d be happy to deliver a holiday-let mortgage in time for the upcoming season.

Working on a similar case?

If past credit issues are preventing your client from securing finance for a strong investment opportunity, speak to our team to explore your options.

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FAQs

What are void periods?

During a void period, a rental property is vacant between tenants. No rent is collected, but landlords still face costs such as council tax and mortgage payments. As such, prolonged void periods can create financial challenges for BTL investors.

How are living costs measured?

Living costs are primarily measured through the Consumer Prices Index (CPI). This is the key economic indicator that measures the average change over time in the prices paid by consumers for a representative “basket” of goods and services. The Bank of England is responsible for trying to keep the CPI at 2%, but it has consistently been above 2% for several years now.

What is a holiday-let?

A holiday let, sometimes known as a short-term-let, is a property that is rented to guests who are using the property for a holiday stay. They are typically only available on a short-term basis, and may only be available during the summer months.

Where in the UK is a popular holiday-let location?

In recent years, the South West of England has emerged as a hotspot among holiday makers, with the likes of Devon, Dorset, and Cornwall proving tempting. Although, any spot in England and Wales which has a strong tourism presence will likely be popular with visitors.

What other issues in a person’s financial history can Market Financial Solutions work with?

There are various forms of adverse credit that we can consider. On top of missed payments, we can consider CCJs, defaults, and even bankruptcies. It should be remembered that every case is assessed on its own merits. Also, all our deals are underwritten from day one of an enquiry. So, where these issues do present themselves, we will address them asap.