Holiday Let Mortgage Guide | A Practical Guide to Holiday Let Mortgages. Are you planning to buy a property to rent out as a holiday home? A holiday let mortgage may help you finance a property designed for short-term rental use. Holiday let mortgages are different from standard buy-to-let mortgages. They are specifically designed for properties rented to guests on a short-stay basis. This includes tourists, families, and weekend visitors.
Airbnb properties are commonly financed using holiday let mortgages. Most lenders require the property to be let on a short-term basis to paying guests rather than long-term tenants.
Local council rules may apply to Airbnb usage, especially in popular tourist areas. Some lenders will also ask whether the property will be owner-occupied for part of the year.
If you are comparing options, a holiday let mortgage can offer features that better reflect seasonal income and higher rental turnover. Using the right mortgage adviser is important when exploring this type of borrowing.
Popular Holiday Let Booking Platforms
Many owners use online platforms to attract short-term guests.
- Airbnb: typically charges around 15%, split between the host and the guest.
- Vrbo: Charges around 8% depending on listing type.
- Sykes Cottages: Commission often ranges from 20 to 25%.
- Booking.com: Fees usually range between 15 and 20%
Choosing the Right Location for a Holiday Let
Choosing the right location is essential when investing in a holiday let property. Demand, accessibility, and local rules all play a role in long-term success.
Tourism demand
Focus on locations with strong, year-round visitor demand. Areas that attract both leisure and business travellers tend to offer more consistent booking levels.
Accessibility and transport links
Properties with good road, rail, or airport access are often more appealing to guests. Easy travel can increase occupancy and improve overall rental performance.
Local planning rules and restrictions
Always check local authority rules before purchasing. Some areas apply short-let restrictions or Article 4 Directions that can limit holiday letting. Speaking with a mortgage adviser can help you understand how local regulations may affect finance options.
Property management and ongoing support
Reliable cleaning, maintenance, and key handling services are essential. If you do not live nearby, ensure professional management is available locally. A specialist buy-to-let mortgage broker can also advise on lender requirements linked to managed holiday lets.
Choosing the right location helps reduce risk and supports sustainable rental income. Professional advice should always be based on your individual circumstances.
Costs to Consider When Buying a Holiday Let
Holiday let mortgages often involve higher upfront and ongoing costs.
Common expenses include:
- Mortgage deposit from £50,000 for a £200,000 property
- Stamp Duty with the higher rate surcharge applied
- Legal and valuation fees typically between £1,000 and £2,000
- Insurance costs ranging from £300 to £800 per year
- Letting agent fees of 20 to 30 per cent of rental income
- Cleaning and maintenance costs, which vary by usage and location
Checklist Before You Buy a Holiday Let
Before buying a holiday let, it is important to plan carefully. Holiday let properties are treated differently from standard buy-to-let investments. The right preparation can help reduce risk and protect your income.
Start by speaking to a holiday let mortgage broker who understands lender criteria and short-term letting rules. A specialist adviser can explain borrowing options and help you find a suitable mortgage for your situation. You can use our “Find a Mortgage Adviser” tool to locate brokers with experience in holiday let mortgages.
Obtain a realistic rental income projection from a local letting agent. This helps you understand seasonal demand and expected occupancy levels. Lenders may also rely on these figures when assessing affordability.
Research local planning rules and licensing requirements. Some councils restrict short-term lets or require registration. Failure to comply could limit your ability to rent the property.
Budget for all associated costs. This includes mortgage payments, insurance, maintenance, utilities, furnishings, and ongoing management. Holiday let insurance often differs from standard landlord cover.
Make sure you understand your tax obligations. Furnished holiday let rules can affect income tax, capital gains tax, and allowable expenses. Professional tax advice is recommended.
Plan for quieter periods when bookings may drop. Off-season income can be lower, so ensure you have sufficient reserves to cover expenses during these times.
Decide how you will market the property. You may choose to advertise through online platforms or work with a local managing agent. Each option comes with different costs and levels of involvement.
Consider whether owning the property through a limited company is suitable. Some investors choose this structure for tax or long-term planning reasons. A mortgage adviser can explain lender options for company ownership.
What Ii 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
Top Lenders Offering Holiday Let Mortgages
Several UK lenders offer mortgages specifically designed for holiday let properties.
Criteria vary by lender, so professional advice is strongly recommended.
Leeds Building Society
Offers specialist holiday let mortgages for UK properties for short-term letting use.
Principality Building Society
Accepts holiday homes across the UK, subject to rental demand and local restrictions.
Suffolk Building Society
Available for properties in England and Wales. Applicants must be UK residents.
The Mortgage Works
Allows limited holiday letting in some cases but may not suit full-time holiday letting.
A whole-of-market mortgage adviser can assess lender criteria and help you access suitable holiday let mortgage options.
You can use our Find a Mortgage Adviser service to speak with an expert who understands holiday let lending.
Tax Benefits for Furnished Holiday Lets
To qualify as a Furnished Holiday Let, your property must meet specific HMRC conditions.
The property must:
- Be available to let for at least 210 days per year
- Be actually let for a minimum of 105 days per year
- Be located in the UK or the EEA
Potential Tax Advantages
Qualifying as an FHL may provide several tax benefits.
These can include:
- Capital allowances on furniture and fittings
- Profits treated as earned income for pension contributions
- Ability to offset mortgage interest against rental income
Tax rules can change, and individual circumstances differ. Always seek professional tax advice.
Top Tip
Track occupancy carefully. Falling below the 105-day letting threshold could result in the loss of FHL status and associated tax benefits.
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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. |
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