Using a Bridging Loan to Finance a Holiday Let: A Quick Guide for Brokers

The demand for holiday rentals in the UK has surged in recent years, making holiday lets an increasingly attractive investment opportunity. However, financing a holiday let isn’t always straightforward, especially for those looking to purchase unique or high-value properties. This is where bridging loans for holiday lets can play a crucial role, offering a flexible, short-term funding solution to help investors secure their dream property quickly.

Why Consider a Bridging Loan for Holiday Let Investments?

In a fast-moving property market, investors need quick access to funds. Traditional mortgage applications can take several weeks, during which time prime opportunities may be lost. A bridging loan offers an ideal alternative by providing short-term finance, giving borrowers the ability to act swiftly. Learn more about our bridging loan products here.

Key Reasons to use a Bridging Loan for a Holiday Let:

• Fast access to capital: Perfect for time-sensitive purchases, such as auctions or chain-break scenarios.

• Flexible repayment terms: Bridging loans are typically interest-only with a lump sum repayment at the end of the term.

• Option for refurbishment: Many investors purchase properties requiring work before they can be listed as holiday lets. Bridging finance can include funds for refurbishment.

• Property value growth: Once the property is fully operational and generating income, borrowers can refinance onto a standard holiday let mortgage.

Is It a Good Time to Invest in Holiday Lets?

Holiday let mortgage applications have seen a significant rise—by 23% compared to pre-pandemic levels, according to a 2024 Moneyfacts report. However, the market is poised for change, with upcoming taxation and regulatory updates for furnished holiday lets (FHLs) expected to reshape the landscape for investors.

Despite strong demand, the regulations set to take effect in 2025 mean that investors must carefully assess compliance and operational costs. Nonetheless, for those with a well-thought-out strategy, holiday lets remain an attractive opportunity, offering strong potential returns in a thriving domestic tourism market.

Pros and Cons of Using a Bridging Loan for Holiday Lets

Pros

• Quick turnaround: Funds are often available in days, not weeks.

• Increased flexibility: Ideal for properties requiring refurbishment before being listed.

• Competitive advantage: Investors can secure desirable properties before competitors using slower finance options.

Cons

• Short-term nature: Borrowers must have an exit strategy, such as refinancing or selling the property.

• Risk of delays: If the property isn’t ready for refinancing on time, it may require an extension, incurring additional costs.

Location Matters: Choosing the Right Holiday Let Property

When investing in a holiday let, location is key. Popular tourist hotspots and scenic areas tend to yield the highest returns. Coastal towns, National Parks, and historical cities remain top choices for investors.

Key Factors to Consider When Selecting a Location:

• Demand: Is the area popular year-round, or is it seasonal?

• Amenities: Proximity to local attractions, restaurants, and transport links can enhance the property’s appeal.

• Unique selling points: Properties with standout features, such as sea views or heritage charm, can command premium rates.

• Regulations: Check local licensing and short-term let regulations, as these vary by region.

Checklist: How to Secure a Bridging Loan for a Holiday Let

1. Prepare key documents: Include property details, purchase price, and intended use.

2. Have an exit strategy: Outline whether you’ll refinance or sell the property after refurbishment.

3. Work with experienced lenders: Choose lenders like Alternative Bridging Corporation with expertise in property finance.

4. Engage a knowledgeable broker: A broker familiar with holiday let investments can streamline the process.

5. Check regulations: Ensure compliance with local short-term let licensing requirements.

Why Work with Alternative Bridging Corporation for Holiday Let Financing?

At Alternative Bridging Corporation, we specialise in providing fast, flexible bridging loans tailored to unique property investments, including holiday lets. With over 30 years of experience in property finance, we understand the complexities of the market and pride ourselves on offering bespoke solutions that meet the needs of both brokers and borrowers.

Whether it’s a coastal retreat or a countryside cottage requiring refurbishment, our bridging loans can help investors move quickly and capitalise on lucrative opportunities.

If you’re a broker working with clients interested in holiday rentals, get in touch with our team to learn more about how we can help. You can also explore our bridging loans for more information on our flexible financing solutions.

Sources

2024 Moneyfacts report