Holiday Let Mortgage Guide | An Insider’s Guide to Holiday Let Mortgages. Are you considering buying a property that you can rent out as a holiday home? A holiday let mortgage could be the key to turning that idea into reality. Unlike standard buy-to-let mortgages, holiday let mortgages are designed specifically for properties that are rented out on a short-term basis, whether that’s to tourists, weekend visitors, or families looking for a getaway.
In this insider’s guide, we’ll walk you through everything you need to know before applying. From how holiday let mortgages work, to the lending criteria, tax advantages, and potential risks, this guide will give you a clear picture of what to expect. Whether you’re a first-time investor exploring the holiday rental market or an experienced landlord looking to diversify, understanding the finer details of holiday let finance is essential.
What Is a Holiday Let?
A holiday let is a furnished property that is rented out to paying guests on a short-term basis (e.g. by the night or week) typically located in popular tourist destinations.
It’s different from a buy-to-let, which is usually let out on a long-term tenancy.
Key Differences: Holiday Let vs. Buy-to-Let
| Feature | Holiday Let | Buy-to-Let |
|---|---|---|
| Rental Term | Short-term (days/weeks) | Long-term (6+ months) |
| Income Potential | Higher (seasonal peaks) | Steady, but lower |
| Mortgage Type | Holiday Let Mortgage | Buy-to-Let Mortgage |
| Tax Treatment | Eligible for Furnished Holiday Let (FHL) reliefs | Limited tax relief |
| Management | More hands-on (bookings, cleaning) | Less frequent turnover |
Who Is Eligible for a Holiday Let Mortgage?
Most lenders require that:
You own your own home
You have a good credit history
You can provide a 25%–30% deposit
The property meets minimum occupancy rules for tax relief
What Are the Mortgage Requirements?
| Requirement | Typical Lender Criteria |
|---|---|
| Deposit | 25–30% minimum |
| Minimum Income | £20,000–£40,000 per year |
| Property Use | Must be a holiday let – not a second home or serviced accommodation |
| Rental Coverage | Must generate 125–145% of mortgage payments in rental income |
| Letting Period | Must be available to let for 210 days and actually let for 105 days per tax year |
How Much Can I Borrow?
Holiday let mortgage borrowing is based on:
Projected rental income (verified by a holiday letting agent)
Your personal income and affordability
Lender-specific stress tests (usually assuming interest rates around 5–7%)
You will need a formal holiday letting income projection to get an accurate borrowing figure.
Top Lenders Offering Holiday Let Mortgages
| Lender | Notes |
|---|---|
| Leeds Building Society | Specialist holiday let mortgages available |
| Principality Building Society | Holiday homes across UK eligible |
| Suffolk Building Society | England & Wales only – must be a UK resident |
| The Mortgage Works | Some flexibility on usage but not always suitable for full holiday let |
A whole-of-market mortgage adviser can help you access the best deals.
Tax Benefits for Furnished Holiday Lets (FHLs)
To qualify as an FHL, your property must:
Be available to let for 210 days/year
Be actually let for 105 days/year
Be in the UK or EEA
Benefits Include:
- Capital allowances on furniture and fittings
- Profits count as earned income for pension purposes
- Ability to offset mortgage interest against rental income
Top Tip:
Track occupancy carefully. If you fall below 105 days let, you risk losing FHL status and the tax perks that come with it.
Holiday Let Mortgage Mythbusters
| Myth | Truth |
|---|---|
| “I can use a buy-to-let mortgage instead.” | ❌ No – most BTL mortgages prohibit short-term lets. |
| “I don’t need permission to holiday let.” | ❌ You may need planning permission, freeholder consent, or lender approval. |
| “I can stay in the property whenever I want.” | ✅ Yes, but excessive personal use may affect your FHL tax status. |
| “It’s passive income.” | ❌ Not quite – holiday lets require active management or hiring a letting agent. |
| “Holiday lets are only for coastal cottages.” | ❌ Not true – countryside, cities, and even some commuter areas work well. |
Insurance for Holiday Lets
Standard landlord insurance won’t do. You’ll need specialist holiday let insurance, which typically includes:
| Cover Type | Details |
|---|---|
| Buildings and contents | For holiday letting use |
| Public liability | Essential in case guests are injured |
| Loss of income | Covers if your let becomes unusable |
| Accidental damage | Often needed due to high guest turnover |
See the Alan Boswell Group’s policies for examples.
Do I Need Planning Permission?
Short answer: It depends.
Some councils (especially in areas like Cornwall, the Lake District, and London) have introduced rules requiring change of use permission for holiday lets. Always check with the local planning authority.
Costs to Consider
| Cost Type | Estimated Amount |
|---|---|
| Mortgage deposit | £50,000+ (for £200k property) |
| Stamp Duty | Higher rate applies (3% extra) |
| Legal and valuation fees | £1,000–£2,000 |
| Insurance | £300–£800/year |
| Letting agent fees | 20–30% of rental income |
| Maintenance and cleaning | Varies by location and frequency |
Common Booking Platforms
| Platform | Commission |
|---|---|
| Airbnb | ~15% (split between host and guest) |
| Vrbo | ~8% |
| Sykes Cottages | ~20–25% |
| Booking.com | ~15–20% |
Choosing the Right Location
Tourism demand: Look for areas with year-round appeal
Accessibility: Good transport links help boost bookings
Local restrictions: Check for short-let regulations or Article 4 Directions
Management availability: Cleaning and key handling needs to be feasible
Checklist: Before You Buy a Holiday Let
- Speak to a specialist holiday let mortgage broker
- Get a rental income projection from a local agent
- Research local planning and licensing requirements
- Budget for all costs, including insurance and furnishings
- Understand your tax obligations and FHL rules
- Plan for off-season periods with reduced income
- Choose a letting platform (or agent) for marketing
- Consider using a company structure for ownership
A holiday let can be a lucrative income stream and a smart investment – but it’s not without complexity. From securing the right mortgage to managing the day-to-day logistics, expert guidance is essential.
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FAQ: Holiday Let Mortgage Guide
| Question | Answer |
|---|---|
| 1. What is a holiday let mortgage? | A holiday let mortgage is a type of loan designed for purchasing a property that will be rented out to short-term guests or holidaymakers rather than long-term tenants. Lenders assess income from potential holiday rental bookings instead of standard tenancy agreements. |
| 2. How is a holiday let mortgage different from a buy-to-let mortgage? | A buy-to-let mortgage supports longer-term residential tenants, while a holiday let mortgage covers short-term holiday rentals. Lenders assess projected seasonal income and personal affordability rather than standard rental yields. |
| 3. Can I stay in my holiday let property? | Yes, most lenders allow owners to use the property for personal holidays, provided it is available to rent for the majority of the year. Always confirm the permitted number of personal weeks with your lender. |
| 4. Who can apply for a holiday let mortgage? | UK residents, company directors, and sometimes limited companies can apply. Applicants need good credit, a steady income, and typically a minimum 25 percent deposit. Some lenders require prior landlord experience, although it is not always essential. |
| 5. How much deposit do I need for a holiday let mortgage? | Most lenders ask for a deposit of between 25 and 30 percent. Higher deposits may be needed for luxury or high-value coastal and rural properties. |
| 6. What income do lenders consider? | Lenders review both your personal income and estimated rental income based on seasonal demand, local occupancy rates, and property type. They may request a projection from a recognised holiday letting agent. |
| 7. Can I get a holiday let mortgage through a limited company? | Yes, many lenders now accept applications through limited companies, especially those set up for property investment. Company directors will usually be required to provide personal guarantees. |
| 8. What type of properties can qualify as a holiday let? | Flats, cottages, lodges, and coastal homes can qualify if they are self-contained and meet local planning and safety regulations. The property must be available to rent for most of the year. |
| 9. Are there tax benefits with a holiday let mortgage? | Furnished holiday lets can qualify for certain tax advantages such as capital allowances and deductible running costs. You should always speak with a tax adviser before purchasing. |
| 10. How do I find the right holiday let mortgage lender? | Holiday let mortgages are a specialist product, so using an independent adviser through Connect Experts ensures you access whole-of-market lenders who understand seasonal income and flexible criteria. |