Holiday let mortgages

What is a holiday let mortgage? A holiday let mortgage is different from a standard buy to let mortgage for long-term residential tenants.

A traditional holiday let allows landlords to let out their property to holidaymakers, typically with a minimum stay of one week.

Do mortgage companies allow AirBnB? Yes, it is possible to secure a holiday let mortgage on an AirBnB property.

Recently even shorter-term lettings, of anything from a one night booking, have become popular. A company called Airbnb made this popular, but other platforms also offer this service.

There are an increasing number of lenders offering holiday let mortgages, some will accept traditional holiday lets only, and others will also accept AirBnB style lets.

Lenders who offer mortgages on AirBnB properties will only lend on whole properties, not by room.

How much can I borrow for a holiday let?

Holiday let deposits currently need to be at least 20% of the property value.

This means that you can borrow a maximum of 80% of the property value on a holiday let mortgage.

Is it possible to borrow more than 80%? If you have other property that you own outright, or have a large amount of equity in, it may be possible to secure additional borrowing using that property as security.

Do holiday let lenders have a minimum loan amount? The minimum loan amount on a holiday let mortgage is currently £50,000.

How is borrowing calculated on a holiday let mortgage?

Holiday let mortgages are based on rental income from the property, rather than just personal income alone.

When assessing your affordability, a lender will look at the expected rental income from the property, the location of the property, and the amount of time (if any) the applicant intends to use the property themselves.

The reason personal use of the property is a factor, within affordability calculations, is because during these periods the property will not be “self-funding”.

This means that, rather than a third party paying rent in order to cover the monthly mortgage payment, the mortgage holder would essentially be covering that cost.

As rental income is seasonal and tends to vary, some lenders require evidence of rental income from each season, to assess affordability.

Depending on the lender’s criteria, evidence can involve a reference from a holiday let business, in order to provide an indication of the rental income that has been declared.

Holiday let mortgages as an individual or through an SPV/limited company

Holiday let mortgages can be in single, or joint names (usually up to four people).

You can also secure a holiday let mortgage through an SPV (Special Purpose Vehicle, a type of limited company set up purely for property investment as opposed to a limited company trading for some other purpose) or trading limited company.

Can I also stay at my holiday let property?

Yes. We have access to lenders that permit landlords to use the property, for up to 90 days a year, allowing you to enjoy the benefit of owning the property and receiving rental income in return.

Do holiday let mortgage lenders look at personal income?

Most lenders consider personal income when assessing affordability on a holiday let mortgage.

The minimum income is usually from £20,000 - £40,000, however some lenders have no set minimum income criteria.

The reason personal income is considered, is because lenders want to ensure that landlords can cover the cost of the mortgage payments when the property isn’t occupied.

Do you have to be a homeowner to get a holiday let mortgage?

Typically lenders do require landlords to be a home owner, however first time buyers are considered by some lenders.

Lenders look for home ownership because it demonstrates a proven track record of managing a mortgage.

It also reduces concerns that applicants will permanently reside in the property (some holiday let mortgages do allow personal use of a holiday let, currently up to a maximum of 90 days).

Holiday let mortgage lenders

The number of lenders offering holiday let mortgages has grown in recent years. There are a range of building societies and specialist lenders who offer holiday let mortgages, each have different criteria relating to the property and the applicant.

Holiday let mortgages by location and type

One of the standard criteria questions for all rental property is, where is the property located?

At present, we can access lenders who will accept properties in England, Scotland (mainland) and Wales.

Can I get a mortgage on a holiday park property?

Holiday park properties are more complex to match with a lender, but this is possible.

Rates tend to be higher, due to the property re-sale value (if the lender had to repossess, the value they could recoup would be lower, so to mitigate that risk the rates are higher).

Can I get a holiday let mortgage on a timber lodge, caravan or mobile home?

It is not currently possible to secure a holiday let mortgage on a timber lodge, caravan or mobile home.