Our best holiday let mortgages

Holiday let deposits currently need to be at least 20% of the property value. This means the maximum loan to value (LTV) for a holiday let is 80%. Mortgage interest rates are typically lower if you put down a larger deposit, of between 25-40% of the property value.

At present, holiday let mortgage 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, meaning yields are very favourable.

There are considerations to take into account when running a holiday let. They require more regular management, such as cleaning, laundering, and checking visitors in and out. The owner will also be responsible for covering all of the bills, regardless of whether the property is occupied or not.

But, the owner does have the benefit of being able to stay in the property themselves for some of the year.

The loan size you can get with a holiday let mortgage will depend on the rental income it receives or is expected to generate. 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 as will school holidays, due to the level of demand. Winter, by contrast, tends to attract lower rents, 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 throughout the year and offer a loan amount related 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.

Unfortunately, we cannot offer holiday let mortgages for 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. This is why the lenders we work with will not accept temporary structures as the security for a holiday let - or other - mortgage.

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 holiday let, rather than long-term lettings where a tenant will live in the property permanently.

If you intend to let out your entire house as an AirBnB rather than live in it, 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 interest for borrowing the money. This is so they end up owning the property at the end of the term.

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 may be 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.

Holiday let mortgages are not regulated by the FCA (Financial Conduct Authority). A holiday let mortgage is a type of buy to let mortgage. Buy to let mortgages are generally not FCA regulated, because they are seen to be products taken out by businesses, not by consumers.

You may be able to get a holiday let mortgage as a first time buyer. If you are the only applicant on the mortgage and are a first time buyer, there are fewer options. However, you could also consider making a joint application with someone you trust, who has owned property before. This can widen your options. Get the help of a specialist broker like Commercial Trust.

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. 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.

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 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 happily guide you through.

You only pay council tax on a holiday let property if it does not qualify for holiday let business rates.

To qualify for business rates a property in England needs to be available to let for a total of 140 nights per year and actually let for at least 70 nights in the previous 12 months.

A property in Wales needs to be available to let for a total of 252 nights per year and actually let for at least 182 nights in the previous 12 months.

No, it is not particularly hard to get a holiday let mortgage. A specialist mortgage broker such as Commercial Trust can help you find a suitable product from a wide choice.

Whilst holiday let mortgages are a more specialist type of borrowing, which means there are fewer lenders than for residential mortgages, there is still plenty of lenders offering them.

First time landlords can secure a holiday let mortgage, but if you own your own home this presents more lender options.

First time buyers have fewer lender options, but it still may be possible to get a holiday let mortgage.

Using a broker to help you find a deal suited to you can be helpful, because a specialist in these products will know how to go about appropriate due diligence to find you a competitive deal that suits your needs and circumstances.

There is a greater level of administration associated with holiday lets because, rather than tenants moving out infrequently, you have a turnover of tenants regularly. This can be outsourced, but you would need to factor the costs of that into your profit and loss.

Upfront costs are likely to be higher, as holiday lets must be fully furnished prior to renting. Expectation from holiday tenants is higher, in terms of facilities and amenities, because rather than spending day to day life in the property, a holiday is a special time that people look forward to so the property must meet that anticipation.

To stand out against other holiday lets, you are likely to have to invest in special extra touches and quality of décor and furnishings that would not be required of a standard, unfurnished let.

However, holiday lets are typically significantly more profitable than standard buy to let properties, because the yields are usually higher as a result of charging rent by the day or week, rather than by 6 or 12 months. This can make holiday lets a very lucrative investment.

A residential mortgage is not suitable if you are permanently letting out your property on a short-term/holiday let basis, so a holiday let mortgage is the ideal way to secure borrowing.

You will need a specialist holiday let mortgage, if you are buying an AirBnB property. There are a number of providers who will offer AirBnB mortgage lending, but each lender has different criteria, so the easiest way to find out which lender is suited to your needs is to speak to a specialist broker like Commercial Trust.