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Holiday Let Mortgages

With summer approaching on the horizon, holiday let mortgages enquiries are on the increase. As the largest company in the holiday let market, it’s unsurprising that Airbnb is the most popular choice among both property buyers and holiday renters.

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Applying for a UK Holiday Let Mortgage

Holiday lets in the UK are increasingly popular, whether looking for a holiday let mortgages UK rent out an existing home or applying for a buy to let mortgage holiday rental product to make a new investment.

There are two primary options:

  • Remortgaging a home on a buy to holiday let mortgage.
  • Purchasing a second home on holiday let mortgages designed for this type of rental.

Second mortgages can be trickier, given that you'll need to prove affordability for both loans, but can be arranged provided your income demonstrates affordability.

Here we'll explore the best holiday let mortgages 75 LTV rated and what eligibility criteria apply to the most competitive holiday let mortgage rates.

The following topics are covered below:

What are the Eligibility Criteria for Holiday Let Mortgages?

What is the Difference between a Buy to Let Mortgage Holiday Property-Based and a Residential Mortgage?

Can I Apply for a Normal BTL Mortgage, Or Do I Need to Consider Holiday Let Mortgages UK?

What are the Best Holiday Let Mortgage Rates?

How Does My Deposit Impact My Holiday Let Mortgage Rates?

Is There a Maximum Buy to Holiday Let Mortgage Value?

What are the Lending Criteria for Holiday Let Mortgages in Northern Ireland and Scotland?

Can I Get a Limited Company Holiday Let Mortgage?

What Tax is Payable on Holiday Let Mortgages UK?

How Can Holiday Let Mortgage Brokers Help?

Expert Advice Finding a Buy to Holiday Let Mortgage

What are the Eligibility Criteria for Holiday Let Mortgages?

Holiday let mortgages are designed for investment properties rented out on a short-term basis.

Some of the standard criteria include:

  • Minimum income - that could be between £10,000 and £25,000, or a threshold of £40,000 depending on the lender.
  • Loan size - typically, you can borrow from £40,000 and up to £1 million per property.
  • Loan to Value - most lenders will require a 25% deposit, with a 75% LTV maximum.
  • Age - holiday let mortgages tend to be available to applicants over 21, with some lenders putting upper age caps of around 85 on their products.
  • Portfolio - in some cases, you will have a maximum number of properties that can be mortgaged with the same lender. That varied from three to ten properties.
  • Rental income - lenders will occasionally need evidence of the expected rental income, which needs to be at 140% or more of the mortgage interest payments based on stress-tested interest rates.

What is the Difference between a Buy to Let Mortgage Holiday Property-Based and a Residential Mortgage?

Residential mortgages cannot be used to mortgage a holiday let. But, if you have a property already and decide to take out a second mortgage, this can be possible even if you're still living in the property some of the time.

However, the lender will likely require clauses such as limitations on how the time is split between a residence and holiday let and restrictions on the maximum LTV available.

The key is that residential property, a buy to let investment, and a holiday home are all different scenarios, and you need to be clear about your intentions.

A mortgage secured against a property used for another purpose than that declared can be considered a breach of contract and have severe consequences.

Can I Apply for a Normal BTL Mortgage, Or Do I Need to Consider Holiday Let Mortgages UK?

Buy to holiday let mortgages are intended for short-term rental businesses, which let the home to temporary guests.

This scenario is different from having long-term tenants on an assured tenancy agreement, so you'll need to ensure you apply for the correct type of mortgage.

What are the Best Holiday Let Mortgage Rates?

Holiday let mortgages rates can vary and won't be comparable to residential averages. The market is reasonably specialist, so most high street banks will not offer this type of product.

Rates on holiday let mortgages depend on:

  • How much deposit you have available.
  • The anticipated rental income.
  • Your credit rating
  • Other income.
  • Your age.
  • What type of property it is.

You can get interest-only holiday let mortgages, which in some cases may be preferable.

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How Does My Deposit Impact My Holiday Let Mortgage Rates?

Lenders will typically need a deposit of 25% for a holiday home rental and at least 15% if you will be living in residence some of the time.

If you have a lower deposit, the lender is being asked to accept a higher risk. So it would be best if you worked with an experienced broker who can signpost your application to mortgage providers who may offer flexibility.

Other risk factors can also drive up the deposit requirement, so the more influential the security you can offer, the lower your rates will be on a low deposit application.

Is There a Maximum Buy to Holiday Let Mortgage Value?

The main limiting factor on holiday let mortgages is how much rental income it will generate. Mortgages are arranged similarly to a buy to let mortgage, assessing the average rental to arrive at an annual average.

For example, if you pay £500 a month towards the holiday let mortgage, your income will need to be at least 125% of the annual interest - so at least £625 a month on average.

That maximum can increase depending on the property and your income tax band, so it might be up to 170% of the interest charges.

Potential income depends on the occupancy rate, the property's desirability and location, so the more in demand the rental, the higher the earnings and the more flexible the mortgage terms.

What are the Lending Criteria for Holiday Let Mortgages in Northern Ireland and Scotland?

Mortgage lending in Northern Ireland and Scotland can be slightly different than in other parts of the UK.

The main differences are that some lenders don't cover these regions, and sometimes postcode restrictions exist.

Revolution Finance Brokers organises finance nationwide, so if you're trying to find a competitive holiday let mortgages anywhere in the UK, please do give us a call.

Can I Get a Limited Company Holiday Let Mortgage?

Possibly yes. Commercial mortgages are more flexible than residential, but the lender will need to understand your business financials and how the investment in your holiday let relates to your core business activities.

What Tax is Payable on Holiday Let Mortgages UK?

Many investors decided to purchase rental properties due to tax allowances and advantages, which have since been removed with new roles and regulations around how rental income is declared.

However, there are still plenty of opportunities to earn healthy returns.

Also, many furnished holidays let properties are not impacted by the changes to tax regimes, as they are a different type of business investment than a regular rental.

There are several conditions to be eligible for preferential tax treatment, such as letting the property for at least 105 days a year and making it available to rent for at least 210.

It's also wise to seek independent advice before investing in a new holiday let. You'll need to know about things like average occupancy levels, maintenance costs, service charges, rental income and overall what profit you stand to make after you've factored in your mortgage interest charges.

How Can Holiday Let Mortgage Brokers Help?

As a whole-of-market broker, the Revolution team can help drive down your mortgage costs and ensure you apply to a suitable lender who will be in a great position to approve your application.

We have access to all the lenders and mortgage products on the market, matching you with exclusive deals that you won't find on any price comparison site.

Remember that banks can only sell mortgage products on their books, and holiday let mortgages are somewhat of a niche, so you can save a considerable amount of money in your mortgage interest by working with an independent industry expert.

Expert Advice Finding a Buy to Holiday Let Mortgage

Should you be interested in learning more about holiday let mortgages, please contact the Revolution team at info@revolutionbrokers.co.uk.

Alternatively, you can call us on 0330 304 3040.

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature. We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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