To overpay mortgage or to buy a holiday home

[WakeMeFriday]

We have some savings and I feel really tempted to explore a holiday home in Spain but my DH thinks we would be better off either by paying off our mortgage or buying a buy to let in UK.
I am more of a dreamer while my DH is more practical.
What would you do in our position and also please share any insights on buying holiday home in Spain.

I’d overpay the mortgage. But retain at least 6 months worth of living expenses as savings for emergencies.

I’m not a holiday home kind of person as I prefer to holiday in different places each time but aren’t there restrictions since Brexit on how long you can stay in Spain each year? I’ve also heard that they are very hard to sell if the owner has died due to Spanish law.

why not do a long term rent first in Spain & see if you actually want the responsibility of another home.

I wouldn't bother with the hassle of a BTL here

I have a holiday home. I also have a very full bank account. Have you thought about who is going to do repair work when you arrive there for your holiday and there’s a problem? Or who is going to tell you that a pipe has burst and you need emergency work when you are not there? What about local taxes and upkeep every year? Can you afford that as well as a mortgage here and a decent standard of living? If you need the cash back, will you be able to rent it or sell it quickly?

I have a UK rental. Currently saving up the £3k I'll need to evict the occupiers after months of no rent. I'm then selling up & buying a holiday home. People are struggling to afford rent these days, & it's nigh on impossible keeping rent below market rates because maintenance & insurance costs have gone through the roof. I'm fed up of feeling like the proverbial money lender, but show the slightest bit of compassion & you finish up in a situation like I'm currently in. Renting out property is for faceless corporations & cold hearted people. It's why many of us small time landlords are selling to the big players now. The market has changed so much over the last 10 years & it's really not changed for the better wrt tenants & small landlords who want a trusting & fair agreement.

That turned into a bit of a rant, sorry. 15/20 years ago I'd have said btl without a doubt. Nowadays I'd say holiday home every time.

Practically, a holiday home in another country sounds like an expensive, logistical and bureaucratic nightmare!
I'd just go on holiday to Spain each year, much less stress and probably cheaper.

I would pay off the mortgage and go on holidays, I wouldn't buy a holiday home in Spain or a buy to let

We bought a holiday home in the UK. We go ourselves every month or so and then rent it out too. Chose a lovely place and it is so nice to have a change of scene there. We thought about buying abroad (and looked for about six months) but decided we wanted to be able to drive there within a couple of hours.

Overpaying the mortgage is much more sensible of course but I don’t regret it for the experiences. We have worked really long hours for 27 years and this has given us another lease of life. We may only do this for five to ten years as it is an additional expense.

If it all gets too much financially or when we are near retirement, we would sell one property if needed. We chose an area that is quite in demand so think it would sell quite quickly and should hold its value well as we don’t have ‘a very full bank account’ (but full enough for unexpected eventualities like repairs and replacing a boiler if really necessary like @Tatemoderndrawyourown said, this is important for peace of mind) so it is a bit of a calculated risk.

In your case, how important is weather?! That might help determine if it is Spain or UK. I like Spain a lot but wouldn’t want to go too often.

Good luck for your decision.

Just to add, I really get what PPs have said about the hassle and just overpay the mortgage and go on holiday, there’s a lot to be said for that. In our case, we wanted a project (the home needed renovating) and don’t mind going to the same place after years of travelling and living abroad. So depends on how you feel.

We've had both, but I'd overpay the mortgage personally then use the money you have each month to go somewhere different on holiday either in the UK or abroad.

It gets boring going to the same place all the time. And it's not a holiday when you have to go and spend time maintaining the place.

I'm with your DH. I'd get rid of one big debt before taking on another. I also personally don't get why people want to holiday in the same place each time, but each to their own. I'd think carefully about Spain as they hate tourists and foreign landlords.

I wouldn't bother with either.

Btl has so many issues very little profit in it, by the time you pay higher interest rates on btl mortgage and then deal with the maintenance issues.
Any months without a tenant, your responsible for the council tax, and the bills.

Holiday home same thing with maintenance. Spain are trying to discourage Holiday homes and AirBnB they are likely to start hiking taxes.

Get the mortgage paid off.
I'd almost be tempted by a static caravan that you could use every other weekend. But it needs to be no more than a couple of hours drive away, so it's feasible to finish work on Friday and be there for 7/8pm and same on Sunday leave late afternoon and be home for dinner.

After MIL died we used her house (which we owned) as a holiday home (she lived in a lovely part of the country). The hassle of being responsible for another property, especially during lockdown, made us realise that we never wanted to own a holiday home or a second house ever again.

I would definitely use the money to pay off some of the mortgage. You never know what is ahead of you.

Overpay the mortgage then save for the holiday home.

what part of uk are you in? it doesnt cost 3k to evict a tenant in scotland!

Pay mortgage first

Buy camper van & holiday at multiple places

Do you have an EU passport? If not you will be limited to the amount of time you can spend in Spain. Do you speak Spanish? People having mostly empty houses are frowned upon these days with a housing crisis going on there.

I agree.

But I’m one of those pesky people who think that buying a second home should be banned (at least in this country, where it pushes local people out of the housing market and drives up prices).

Agreed, hopefully the government will one day be brave enough to make holiday homes prohibitively expensive so people can buy actual homes.

North of England. We're now in a situation where councils are telling people to stay put till the bitter end, because there's nothing for them to move families in to. So proceedings always run to the point of bailiffs. £2k to £2.5k for court & eviction specialist, then the inevitable £0.5 to £1k for repairs/replacements. I consider myself very lucky that the property isn't mortgaged. If I'd been having to pay that every month it'd have financially crippled me.

I know someone who had a holiday home and they sold it as it just wasn't the dream it seemed. They rented it out but stuff was repeatedly being damaged. Even not renting it out it still needs looking after cleaner, gardener, pool cleaner, general maintenance. Also they got bored of going on holiday to the exact same place all the time and then spending half their holiday sorting out issues with the property. They still spend the same amount of time abroad as they did before but they travel around without the hassle.

I think a lot of people in Spain agree with that.

Ex owner of two separate holiday homes (one abroad, one UK) here

NB “ex”

It quickly becomes a very expensive millstone. Think about how much it costs to entirely furnish and equip a home. Think about what bills you will have to pay. If you rent it out who is doing the admin, the cleaning, the laundry? How will the income affect your tax position? How many times will you realistically be able to visit bearing in mind your annual leave entitlement and your kids’ activities and social life?

If you have additional money just spend it on having fabulous holidays without all of the above.

Oh and I’m also a BTL landlord. DO NOT DO THIS. There’s more return in investing in well managed funds. I’m exiting the market as my tenancies become vacant.

Pay the mortgage off 💯

Alternatively...put the extra money you have into a S&S ISA (£20k let year each, so possibly £40k max per couple). It's a long term investment, minimum 5 years, all gains tax free. 'Should' do better than the interest rate your mortgage is on. Can see in 5/10 years of you want to keep saving or pay off chunk of mortgage.

Look at Meaningful Money on YouTube

6 months expenses easily accessible
Paying into pension regularly
Regular savings - ISA

Pay off the mortgage and secure your future first, you can't afford 2 properties if they need to be mortgaged to pay for it.

Also, with the Brexit rules re occupying a European property as a British passport holder, it'll be a very expensive mistake. Especially if you don't do the homework for it, so many people have been caught out re occupancy rules.