If you love the idea of investing in a static caravan in the UK but are worried about the upfront costs, you’ll be pleased to know that there are many finance options available. With the right plan, you will be able to pay it off in affordable monthly instalments, so there is no need to put your holiday plans on hold.
Choosing to finance a holiday homes is very popular with an estimated 80 per cent of all buyers opting for finance to purchase their holiday home. It may also offer some tax advantages over buying outright to some customers.
But as with any financial arrangement, it is essential that you do your homework before you commit. Seek independent advice and find a caravan loan that you can comfortably afford.
In this complete guide to static caravan finance, we’ll cover everything you need to know and provide you with top tips on where to find a bespoke financial package that meets your needs.
How Are You Going To Pay For Your Caravan?
Unless you have savings or access to a cash lump sum, you will likely need to raise finance to cover the cost of your holiday home. There are many ways do to this, as we’ll cover below, but first, we need to discuss your credit rating.
Do You Have Good Credit Rating?
As with any finance arrangement your credit rating will affect whether you are accepted and the level of interest.
Most Park Approved finance lenders will ask for a minimum deposit starting at around 10 -15%. It its always worth noting that putting down a larger deposit will reduce the overall interest you will pay and reduce your monthly payments and or the term of your loan.
Using the option of finance will add the cost of interest to your purchase so be sure you understand this and how it effects your total costs.
Here are ways in which you can raise funding for a holiday home:
Holiday Park Approved Finance Lenders
If you decide to buy your static caravan directly from the holiday park, they will be able to assist you with a finance plan to meet your needs. Most caravan parks have established relationships with specialist lenders, including banks and financial institutions, who offer competitive rates for this type of purchase. The advantage of these lenders is that they are specialists who understand the holiday home product.
Holiday Parks offering finance are regulated by the Financial Conduct Authority (FCA), so you can be confident that your investment is in safe hands. Decisions are usually made fast, and you could get your loan approved in less than an hour. Your holiday park representative will help you crunch the numbers and find the perfect plan for your family.
Unsecured Loan From Your Building Society or Bank
Another way to raise finance for static caravans is to take out an unsecured loan with your local bank or building society. If you have a good credit rating and an outstanding mortgage with them, they are likely to look favourably on your application although; interest rates tend to be higher on unsecured loans, so this is something to consider.
Secured Loan or Re-Mortgage
If you own a property and have equity available, you could consider re-mortgaging your home or taking out a secured loan. You’ll get a better rate than you would with an unsecured loan, and more lenders are likely to consider your application, but of course, this type of finance does come with risks, so consider your options wisely. In addition to your existing bank or building society, use online comparison sites to find the best finance plan for your holiday home purchase.
Sharing The Cost With Family & Friends
More and more people are buying static caravans and holiday homes with friends or family members to help spread the cost. It is the perfect option for larger families who holiday together, share a support bubble, and even siblings with their own young families. With multiple buyers, you can pay off a larger deposit and significantly reduce your monthly instalments.
These arrangements offer great benefits and many people go into them with the very best intentions. It is our experience that such arrangements can be complex especially if there is a disagreement or one of the parties wishes to sell maybe due to a change in circumstance.
Our advice is to have a legal document drawn up that outlines what would happen in this eventuality.
Static Caravan Prices & Deposits
Static caravan prices range from £10,000 for a pre-used model up to £500,000 and beyond for a brand-new luxury holiday home, so before you start looking at finance, you need to establish how much you can comfortably afford. People typically spend between £20,000 and £40,000 on a static caravan, so we’ll base our calculations below on a £30,000 purchase.
When buying a static caravan or holiday lodge, you will be required to pay a deposit of at least 10% of the total purchase price, although terms vary from lender to lender. Here is an example of a finance plan offered by Black Horse, who specialise in caravan finance:
TOTAL CARAVAN PRICE: £30,000
TOTAL DEPOSIT: £3,000
TOTAL FINANCE: £27,000
APR (AVERAGE): 8.9%
84 MONTHY INSTALLMENTS: £428.36
COST OF CREDIT: £8,982.24
TOTAL AMOUNT PAYABLE: £35,982.24
Monthly Instalments – What You Can Expect To Pay
As you can see from the example above, with a caravan loan of £27,000, you’ll have an average monthly instalment of around £428.00 over seven years. The interest can be seen in in the cost of credit section.
This amount is in addition to your annual sites fees, utility bills, rates, and insurance (which you may pay monthly or yearly), so don’t forget to factor in these costs when planning finance arrangements.
While you may be able to recoup some of your monthly outgoings by subletting your static caravan when you are not using it, rental income is never guaranteed, so do not rely on it when budgeting for a holiday home.
A caravan holiday home is a long-term lifestyle investment, so consider this when deciding how to finance it, and only sign a loan agreement if you are 100% happy that you can meet your monthly obligations.