Holiday Let Mortgages

What is a holiday let mortgage?

A holiday let mortgage is designed for people who are looking to finance a property that will be let out to tourists on a short-term basis.

This is different to a holiday home or second home mortgage. That’s when the property would only be used by you and your family and friends.

What are the differences between a holiday let mortgage and a buy to let mortgage?

A buy to let mortgage is purely for houses or flats that are rented to paying tenants on a long-term basis. The tenants would use the property as their home, whereas holiday lets are purely short-term rentals for tourists.

Holiday lets are becoming more attractive. Not only can they be let out for more money than a normal buy to let property, furnished holiday lets can have tax advantages. In order to qualify, your property must be available for letting as furnished holiday accommodation for at least 210 days per year and let out for at least 105 days a year. Other qualifying criteria may apply. Tax laws can change at any time, so please speak to a tax advisor.

However, there can also be tax implications, such as stamp duty. You could be liable for council tax and utilities on your holiday let as well. Speak to a tax advisor to find out more. 

Can any property qualify for a holiday let mortgage?

Traditionally holiday lets needed to be in typical tourist destinations. This was to ensure a steady stream of rental income. Lenders may still want to see an element of this.

However, mobile homes and properties on holiday parks usually won’t be suitable. This is because they are not easily sell-able should the lender have to repossess.

How much can I borrow on a holiday let mortgage?

How much you can borrow is usually determined by the amount of rent the property might achieve.

As rent is likely to fluctuate throughout the year, lenders will work off the average weekly rent across high, medium, and low seasons. They will assume the property will be let for a certain number of weeks in the year and empty for the remainder. The average may therefore cover 30 weeks rather than 52. You may have to get estimates from registered holiday lettings agents.

The mortgage will typically be capped at a maximum of 75% of the value of the property. Some lenders will only go up to 60%.

Lenders are also likely to assess your personal income and expenditure. There may be a minimum income requirement.

Can I use the property myself?

Yes, you can. The property will need to be available to tourists for at least 210 days of the year, and actually rented for a minimum of 105. Any days that you, family, and friends stay in the property do not contribute to the minimum 105 days.

Can I let the property on AirBnB?

It depends on the lender. Some will be happy with this whereas others won’t let you do it. If you intend to list the property on websites such as AirBnB, inform your advisor at the outset so they can research a suitable lender.

Some types of holiday let mortgages are not regulated by the Financial Conduct Authority.