Holiday Let Mortgages

Holiday lets: the opportunity

Buying a holiday let in a popular tourist location can be a superb investment option and a source of consistent income – as well as providing you with a holiday home that you can use yourself, free of charge.

With the rise of find-a-property sites like Airbnb, plus the increased hassle of travelling abroad during the pandemic, the UK-based ‘staycation’ is hugely popular right now, and it’s a seller’s market for holiday lets.

On top of that, recent tax changes have made holiday lets a very attractive alternative to traditional buy-to-let properties – potentially even more profitable. With demand for holiday lets so strong, you can generate far more from your letting charges than you would from traditional letting.

Overall, there’s never been a better time to get into the vibrant holiday let market.

Getting the right holiday let mortgage

However, buying and renting out holiday lets can be a minefield, particularly if you’re new to the buy-to-let market. Mistakes can be expensive, so you want to get your holiday let purchase right first time. And for most buyers, the right holiday let mortgage is the key to making the whole project work financially.

Ideally, you’re looking for your rental income to cover your mortgage repayments or interest – at least during peak season. That way, all you have to do is keep the bookings coming in, knowing that the financial side is taken care of.

Do I need a specialist holiday let mortgage?

You can’t use a regular residential, buy-to-let or second-home mortgage for your holiday letting property. It must be a mortgage specially designed for holiday lets.

Typically, you’ll be able to get a holiday let mortgage for up to 80% of the property’s value. (This is known as a ‘loan to value’ or ‘LTV’ ratio of 80%.)

The amount you can borrow will also be based on the income that the property is likely to generate.

Holiday let mortgages are normally for two-, three- or five-year terms. Some lenders have different rules for older borrowers, while others aren’t concerned about your age.

What qualifies as a holiday let?

In order to be considered as a holiday let and qualify for mortgage tax relief, your property has to be available to let for at least 210 days per year, and in use for at least 105 of those days.

That does place some obligations on you as a landlord – but you don’t have to let your property for every day of the season, and the rules still leave plenty of time when you can enjoy the property yourself.

Holiday let mortgages: questions to consider

• How much income could your holiday let generate?
• Will you let the property to holidaymakers directly, or use a platform like Airbnb?
• Are you switching from another type of mortgage to a buy-to-let mortgage?
• Will you set up a company or special purpose vehicle (SPV) to collect the rent on your holiday let?
• Will your holiday let be part of a property portfolio?
• Do you want a repayment or interest-only mortgage?