Holiday Let Mortgage

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Some buy to let mortgages are not regulated by the Financial Conduct Authority
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Holiday Let Mortgages

Thinking of investing in a property to let out to holidaymakers? You will need a special type of mortgage – and ideally, advice and support from an experienced mortgage broker.

How do holiday let mortgages work?

A holiday let mortgage is a form of commercial lending, a little like Buy to Let. It works in a similar way to residential borrowing – you will need a deposit and you will make monthly repayments to your lender.

How difficult is it to get a holiday let mortgage?

The main challenge with a holiday let mortgage is that you will need a considerable deposit. Most lenders expect a downpayment of at least 25%.

You will also need to have done some research into how much the property could generate from your guests in high, medium and low season. These numbers form part of the lender’s calculations into how much you could borrow.

With the right advice and support from a mortgage broker, it shouldn’t be too difficult to find a suitable product.

What’s the difference between a holiday let and a Buy to Let property? 

The main difference is that holiday let guests only stay for a few days or weeks at a time. With a Buy to Let, your tenant stays in place for six or 12 months and has an Assured Shorthold Tenancy agreement

Another important difference is that a landlord is not allowed to live in their Buy to Let property, while with a Holiday Let mortgage you can usually stay in the property for a set amount of time each year. 

Do you need a licence for a holiday let?

In Scotland, there are licence requirements for holiday lets, such that from 1 October 2022 if you use accommodation to offer short-term lets in Scotland you’ll need to apply for a licence from your local council, but this doesn’t apply in England, Wales or Northern Ireland.. You will have to comply with various regulations, however, such as fire safety requirements, gas and electricity checks and ensuring you comply with the Disability Discrimination Act. 

Many holiday lettings agencies will help you meet these requirements and others that may apply to your property.

What are the lending criteria for a holiday let?

Every lender is slightly different, but typically they will set criteria including:

    • Minimum income: the lender will often expect you to receive an income outside of the holiday let business.
    • Deposit: usually 25% or more. 
    • Loan to value: the lender may not let you exceed a certain Loan to Value ratio: e.g. 75%.
    • Property type: some lenders will have set criteria around the kinds of property they will or won’t lend against.
    • Credit score: most lenders will explore your credit record. Serious credit issues may limit your choice of lenders. 
  • Personal details: you will usually need to be 21 or over and be a UK resident.

How much can I borrow on a holiday let mortgage?

Lenders will calculate borrowing by looking at the income you could get from the property. They will base this on estimates from an experienced holiday letting agency. We will support you to get these assessments completed and match a lender to your borrowing requirements. 

Are holiday let mortgages more expensive?

As these are commercial mortgages, you can expect to pay higher fees and rates. There are also fewer lenders in this space, so there is less competition to drive lower rates.

Renovations and purchases that increase the appeal or price of your holiday let are tax deductible too.  

Do note that if you only plan to let your property for a few weeks a year, you won’t necessarily need a holiday let mortgage. Certain residential mortgages include an allowance for short-term letting. 

How do I apply for a holiday let mortgage?

As mortgage brokers, we’re here to help you set up a holiday let business. We will explore your situation and plans to seek out cost-effective mortgages to suit you. 

We’ll help you with the mortgage application and make sure you’re aware of all the requirements and considerations involved in starting out with holiday letting. We’ve helped many clients venture into this space and build successful businesses.

Mortgages by Mcateer Ltd is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.

The Financial Conduct Authority does not regulate most Buy to Let Mortgages.

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

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Approved by the Openwork Partnership on 15/01/2024

Your home may be repossessed if you do not keep up with your mortgage repayments.