Looking to purchase a serviced accommodation property or expand your portfolio? Here you’ll find more information and how we can help you.
A serviced accommodation mortgage is a loan which is specifically for properties that are let on a short-term basis, typically by the night to guests. A serviced accommodation property can be a great investment as you are able to charge more than if the property would be let on a buy to let basis.
Our specialist knowledge allows us to support you with serviced accommodation mortgages, helping you secure the right funding to grow a successful property portfolio.
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The lenders will assess your personal income and expenditure alongside the estimated rental income. The lender will assess the application based on the estimated single let rent, rather than the actual rent achieved.
A serviced accommodation mortgage is not to be confused with a holiday let where the lender may let you stay in the property for a short amount of time. A serviced accommodation mortgage is not to be used for your own personal use.
While it can achieve higher rental income the outgoings are significantly higher. When you purchase the property you will have to fully furnish it to make it attractive to potential guests. There is also more ongoing maintenance as the property has to be cleaned after each check out.
Depending on the lender you will typically require:
Deposit: A higher deposit, usually around 20-25% of the properties value is usually required
Surplus rental income: of at least 125-145% of the mortgage payment to cover any rental voids
Credit History: A good credit history demonstrates your ability to manage debt responsibly.
The amount you can borrow with a serviced accommodation mortgage depends on several factors, including the potential rental income of the property, your own financial circumstances and the lending criteria of the specific lender you’re working with. Typically, lenders calculate the maximum loan amount based on a rent-to-mortgage ratio, ensuring that the potential rental income is sufficient to cover the mortgage repayments.
As a general guideline, lenders often require the rental income to be around 125% to 145% of the mortgage payments. This means that the monthly rental income should exceed the mortgage payment by a certain margin to account for potential vacancies, maintenance costs, and other expenses.
Additionally, lenders may consider your personal income, credit history, and existing financial commitments when determining how much you can borrow. They may also factor in the type of property you’re investing in and its location.
To get an accurate estimate of how much you can borrow we assess your individual situation and provide you with a clearer picture of your borrowing capacity based on their specific lending criteria.
Yes, using rental income to cover mortgage repayments is a key characteristic of a serviced accommodation mortgage.
Rent-to-Mortgage Ratio: Lenders usually require the potential rental income to exceed a certain percentage (often around 125% to 145%) of the mortgage payments. This ensures that even if there are periods of vacancy or unexpected expenses, the rental income should be sufficient to cover the mortgage.
Assessment of Affordability: When assessing your application, lenders calculate whether the rental income meets their required ratio compared to the mortgage payments. This assessment helps them determine if the property is likely to generate enough income to support the mortgage.
Property’s Rental Potential: The rental potential of the property, based on factors like location, property type, and local rental market conditions, plays a significant role in this assessment.
It’s important to note that while rental income is a primary consideration, lenders may still consider your personal income and financial situation when assessing your eligibility. Having a property management plan and considering potential expenses like maintenance and property management fees are essential for a successful property investment.
Ultimately, using rental income to cover mortgage repayments is a fundamental concept of investment mortgages, making them a distinct option for property investors seeking to generate income from their investment properties.
Applying for a serviced accommodation mortgage involves several steps that are similar to applying for other types of mortgages. Here’s a general overview of the process:
Initial Chat
Discuss your plans: Give us a call or email us to schedule a call to initially talk through your plans and what you are looking to do.
Documentation Gathering
Prepare documents: Once we’ve had a discussion and what you are looking to do seems feasible and we’ve provided an idea of product interest rates, we will email you our documents to complete and a list of documents to provide.
Research and Preparation
Research lenders: Once we have received our completed documents and requested documents, we will research lenders that offer serviced accommodation mortgages and provide you with the cheapest product options you and the property are eligible for.
Decision in Principle and Mortgage Application
Once a product has been selected e.g. a 2- or 5-year fix product, we will submit the Decision in Principle and Mortgage Application.
Underwriting and Approval
Underwriting process: The lender’s underwriting team will assess your application and verify the provided information.
Property Valuation
Valuation assessment: The lenders will value the property and assess its suitability considering factors like location, size and condition.
Rental Income Valuation
Rental assessment: The lender will also value the projected rental income of the Buy to Let property, considering the condition of the property, local rental market, and other factors.
Offer and Terms
Mortgage offer: If your application is approved, the lender will provide a formal mortgage offer outlining the terms, conditions, interest rates, and fees.
Legal and Regulatory Checks
Legal and regulatory review: Your solicitor or conveyancer will review the property’s legal title, ensuring there are no issues that could affect the mortgage or property ownership.
Completion
Legal: Your solicitor will coordinate the completion process. It’s important to note that the process can vary depending on the lender, your location, and individual circumstances. Working with a knowledgeable mortgage broker can streamline the process, ensure you meet all requirements, and help you find the best Portfolio Buy to Let mortgage for your investment goals.
We are highly experienced so do not hesitate to give us a call to talk through your plans.
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Discuss your plans: Call us to initially to talk through your plans and objectives.
Prepare documents: Once we’ve had a discussion and what you are looking to do seems feasible, we will email you our documents to complete and a list of documents to provide.
Research lenders: Once we have received the required documents, we will research lender options and provide you with the cheapest product options that you and the property are eligible for.
Once a product has been selected e.g. a tracker, 2- or 5-year fix, we will submit the Decision in Principle and when that passes, the Mortgage Application.
Underwriting process: The lender’s underwriting team will assess your application and verify the provided information.
The lender will value the property and assess its suitability considering factors like location, size and condition. The lender will also value the projected rental income of the property, considering the condition of the property, local rental market, and other factors.
Rental assessment: The lender will also value the projected rental income of the Buy to Let property, considering the condition of the property, local rental market, and other factors.
Mortgage offer: If your application is approved, the lender will provide a formal mortgage offer outlining the terms, conditions, interest rates, and fees.
Legal and regulatory review: Your solicitor or conveyancer will review the property’s legal title, ensuring there are no issues that could affect the mortgage or property ownership.
Legal: Your solicitor will coordinate the completion process. It’s important to note that the process can vary depending on the lender, your location, and individual circumstances.
Navigating the dynamic landscape of property investment requires expert insights. Our experienced mortgage advisors bring a wealth of knowledge specific to the UK market. From understanding market trends to staying updated on regulations, we’re here to ensure you’re well-informed at every step.
Securing favourable rates and terms is crucial to the success of your commercial ventures. We enjoy a great relationship with an extensive network of lenders and will negotiate on your behalf to secure the most competitive interest rates and flexible repayment options.
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Secure a mortgage deal today and we'll keep watch on your lender's rates. If a better, suitable deal becomes available, we'll let you know and help you switch.
We have amassed many positive reviews on Google and glowing testimonials from our clients over the years which we are very proud of.
We have excellent relationships with all of our banks and lenders. We're often asked for our opinions on the property market and current mortgage products.
We know that the mortgage market can move quickly, so it can be frustrating to see your lender release a better deal than your current one.
The Keys Mortgages Rate Watch Guarantee is designed to give you peace of mind, knowing you always have the best deal and protect you against missing opportunities of lower rates.
We guarantee to keep watch on your chosen lender’s rates and if a better deal becomes available, we’ll let you know and ask the lender to change product without having to start over (lender restrictions may apply). This is free and included as part of our service.
“I’ve had the privilege of working closely with Cheryl Williams and Amy Zakary over an extensive period, both in my professional role at Precise Mortgages as Sales Director and as a landlord with 32-years experience. In the realms of buy-to-let mortgages locating a broker with genuine specialisation is no small feat.
My confidence in Keys Mortgages is unswerving. Drawing from my experience conducting training at Precise Mortgages, I can vouch for Cheryl and Amy’s exceptional knowledge. Their commitment to delivering a quality service, fused with unwavering expertise, forms the bedrock of their five-star service proposition.”
A mortgage is a loan used to purchase a home. The property you’re buying serves as security for the loan. You make regular payments, which include both principal (the loan amount) and interest, over a specified period. As you make payments, you gradually own more of the property.
There are various mortgage types, including fixed-rate mortgages (interest remains constant), variable-rate mortgages (interest fluctuates), tracker mortgages (linked to the Bank of England base rate), and more. Your mortgage broker can help you find the right option based on your financial situation and preferences.
The amount you can borrow depends on factors like your income, credit history, expenses, and the lender’s criteria. Lenders typically use a multiple of your income or affordability calculations to determine the maximum loan amount.
An agreement in principle (AIP) is a preliminary indication from a lender that you’re eligible for a mortgage up to a certain amount. It’s not a guarantee but can help you understand your budget. A formal mortgage offer is a commitment from the lender to provide the specified amount at agreed-upon terms after a thorough verification process.
Aside from the property’s price, you’ll need to budget for additional costs like arrangement fees, valuation fees, legal fees, stamp duty (if applicable) and potentially broker fees. Your mortgage broker can provide a breakdown of these costs.
A mortgage broker acts as an intermediary between you and potential lenders. They analyse your financial situation, help you find suitable mortgage options, and guide you through the application process. Their expertise can save you time, ensure you’re aware of available options, and increase your chances of securing a favourable mortgage deal.
Send us your enquiry today and one of our friendly advisers will call you back for a free consultation at a time that suits you. Hassle-free with no obligations.
