What is a holiday let mortgage?

Holiday let mortgages are for properties being let out on a short term basis or as holiday accommodation.

Unlike traditional buy to lets, which are rented out on a medium to long-term basis, holiday lets are generally let out short-term, for a few days or weeks (though no guest can stay more than 31 continuous days). These are often let to holidaymakers, groups or individuals. Short term lets serve people travelling for business, leisure or practical stays, who require temporary accommodation which is already furnished and equipped with everything they might need. Lenders will also often allow the owner to occupy the property themselves for up to 90 days of the year.

Holiday let mortgages are sometimes referred to as holiday cottage mortgages.

How much deposit do I need for a holiday let mortgage?

Holiday let deposits currently need to be at least 20% of the property value. This means the maximum LTV for a holiday let is 80%.

Compared to traditional buy to lets, the loan to value (LTV) for a holiday let is often lower. Meaning that the owner will be required to put down a larger initial deposit. This is due to holiday let’s being a higher risk to the lender, as there is a large turnover of people living in the property which can increase the likelihood of damage or non-payment.

Not sure what deposit you will need for your property? You can read our page all about loan to value and deposits, or speak to our dedicated advisor team today.

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Are holiday let mortgages expensive?

At present holiday let rates are typically higher than standard buy to let rates, which would make like for like borrowing more expensive.  However, don’t assume that this puts a holiday let mortgage out of financial reach. Rental income from holiday lets is typically significantly higher than from a standard buy to let.

Running a holiday let also requires more regular maintenance such as cleaning, laundering as well as repairs for general wear and tear. The owner will also be responsible for covering all of the bills, regardless of whether the property is occupied or not. While this can make them more expensive than traditional buy to let properties, the owner does have the benefit of being able to reside in the property themselves for some of the year.

Whilst the costs of a holiday let may be higher, it is important to factor in that you will be charging rent on a nightly or weekly basis and this as a result is likely to achieve much higher rental income than a standard buy to let.

Imagine you rent out a three bedroomed house as a standard buy to let, and say the rent was £800 per month. If the property were a holiday let in a prime holiday location, you might rent it out at a similar sum on a weekly basis. So it is important to look at the rental income in your research.

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How much mortgage can I get for a holiday let?

The mortgage you can get for a holiday let will be based on the rental income. Holiday let rental income is different to a standard buy to let mortgage, this is because holiday lets typically attract different rental amounts according to the season.

Summer will generally attract peak prices. School holidays, due to the level of demand, will also be more expensive. Winter by contrast tends to be cheaper, with the exception of Christmas and New Year breaks. As a result, mortgage lenders will look at an average of high, medium and low season weekly income the security property can attract throughout the year and offer a loan amount according to this, and their maximum loan to value rules.

The maximum loan to value for a holiday let mortgage is currently 80%. So, you can borrow up to 80% of the property value and will need at least a 20% deposit. Every lender has wider criteria – details about the property and applicant, that affect whether they will lend, so it is important not to assume you can definitively borrow at 80% LTV. A conversation with our team will quickly give you the information you need, so do contact us for our help.

We work with a range of over 80 UK buy to let mortgage lenders, including:

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Can you get a mortgage on holiday lodges?

Unfortunately, we cannot offer holiday let mortgages for a holiday lodges.

Holiday lodges, timber lodges, caravans or mobile homes are in essence temporary structures that can be removed from their location. Given the property could be transported away, any loan using the property as security is at significant risk. It is for this reason why the lenders we work with will not accept temporary structures as the security for a holiday let – or other - mortgage.

Can I AirBnB my house, if I have a mortgage?

If you have a residential mortgage, you would need to ask your mortgage provider if you have their consent to AirBnB your house.

A residential mortgage is designed for properties where the owner occupies the property. If you decide to move out of your home on a temporary basis and to rent it out you could ask your lender for a consent to let. It is important to be clear with your lender on the basis under which you will be letting the property. Your lender may assess their decision differently if you are pursuing short term let rather than long term lettings.

If you are outside the initial rate period of your mortgage, you may not be subject to early repayment charges, and if you intend to let out your house as an AirBnB for a long time, then remortgaging on to a holiday let product may be a better option.

Those with residential mortgages on their home often choose capital repayments, where the lump sum borrowed is paid off as well as the interest for borrowing the money. This is so they end up owning the property at the end of the term with the security that brings.

If you remortgage to a holiday let product, you might choose interest only payments, if you no longer want to live in the property, so owning the property at the end of the term maybe less of a priority. On a like for like loan, interest only payments would be less, so the margin between the costs of the mortgage versus the rental income could be more favourable. This may influence a decision to remain on a residential mortgage with a consent to let, or switch to a holiday let mortgage. It may also influence whether you decide to take out a holiday let mortgage on a capital repayment or interest only basis.

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Are holiday let mortgages regulated by the FCA?

Holiday let mortgages are not regulated by the FCA. A holiday let mortgage is a buy to let mortgage designed for holiday or short term let accommodation. Buy to let mortgages are generally not FCA regulated, because they are seen to be products taken out by businesses not by consumers.

Can you get a holiday let mortgage as a first time buyer?

You may be able to get a holiday let mortgage as a first time buyer, call our advisors to discuss this. If you are the only applicant on the mortgage and are a first time buyer the options are narrower. However, you could also consider making a joint application, with someone you trust, who has owned property before. This can widen your options.

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Is a holiday let classed as commercial?

No, a holiday let property does not require a commercial mortgage.

Holiday let properties can be financed with a buy to let mortgage designed for short term lettings, not a commercial mortgage. A commercial mortgage is for a property that a business or multiple businesses operate from.

Similarly, you can take out a holiday let mortgage through a limited company. This still does not require a commercial mortgage. The need for a commercial mortgage is not dictated by the type of applicant you are, it is dictated by the intended use of the building.

Can you use a buy to let as a holiday let?

You can change a buy to let property into a holiday let, but if your property is mortgaged you will need to switch from a standard buy to let mortgage to a holiday let mortgage.

It is not uncommon for landlords to change their investment strategy and choose to rent a former long-term let on a short term holiday let basis. However, the dynamic changes and so a different type of buy to let mortgage is required. It is straightforward to make the change – just like any remortgage process. Be aware that if you are within the deal period of your existing mortgage you may be subject to early repayment charges, so it may be better to wait until your current mortgage is ERC free. Ask our advisors about this and they will guide you through.

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