Best holiday let mortgage deals

What is a holiday let mortgage?

A holiday let mortgage is a loan designed for buying a property you’ll rent out to holidaymakers. Unlike a standard buy-to-let mortgage, this type of mortgage allows for short-term stays, where guests might book a few days or a week at a time.

You’ll usually need to:

• Let the property out for a set number of weeks per year
• Prove the potential income the property could generate
• Use a qualified letting agent or platform to advertise your property

Holiday let mortgages can’t be used for long-term residential tenancies, and they’re not the same as second home mortgages (where you use the home yourself).

Why choose a holiday let mortgage?

Holiday lets can offer a few big advantages:

• Higher potential income than long-term rentals in popular tourist areas
• Tax benefits if your property qualifies as a furnished holiday let
• Personal use – you may be able to stay in the property at times when it’s not rented

Some people use holiday let properties as part of their investment strategy, while others buy one as a way to own a second home that also generates income.

Keep in mind that holiday lets can come with higher running costs and seasonal demand.

How holiday let mortgages work

When you apply for a holiday let mortgage, lenders will usually look at:

• The projected rental income based on similar properties in the area
• Your own income and affordability, especially during quieter months
• Whether the property is suitable for use as a holiday rental
• How often you plan to let the property out each year

Some lenders might ask for evidence from a holiday letting agent or booking platform to back up income estimates.

You’ll often need a larger deposit, usually at least 25% of the property’s value, and you may pay a slightly higher interest rate than for standard mortgages.

There are some holiday let criteria that you’ll need to meet before your mortgage application is accepted. HMRC states that your property must be available to rent for at least 210 days per year, and it must be let out for at least 105 days - that’s equivalent to 15 weeks.

Rentals of your property must be short-term, with no single let for longer than 31 days allowed. If any stay is longer than 31 days, it won’t be counted towards the 105 days mentioned above that you need for your property to be classed as a holiday let.

Be wary of renting out your property to friends and family for free or at a reduced rate, as this also won’t be counted.

Who can get a holiday let mortgage?

To qualify, you’ll normally need to meet the following criteria:

• Good credit history
• Stable personal income alongside the rental income
• A deposit of 25% or more
• Experience as a landlord can help, but it’s not always required

You’ll also need to provide:

• Proof of income (such as payslips or tax returns)
• Details of any existing mortgages or debts
• Estimated rental income for the property
• Some lenders may also want to see a business plan or forecast

If you're self-employed or have multiple income sources, our advisers can help present your case to the right lenders.

How to find the best holiday let mortgage deals

Holiday let mortgages aren’t always listed alongside standard mortgages, so it’s important to shop around.

We work with over 90 lenders, including those who specialise in holiday let mortgage rates. Our advisers will check what’s out there and find a deal that works for you, whether you want a fixed rate for peace of mind or a more flexible option.

We can also help you understand the rules about using the property yourself, and what counts as a qualifying furnished holiday let for tax purposes.

Holiday let mortgage tips

For the best holiday let mortgage interest rates, you should save up as much as possible for your deposit – you’ll need at least 25% of the value of the property. Think carefully about the location, as this can play a big factor in the rental value of your property. It’s also important to do your own research into the local holiday rental market.

You can look at other holiday lets and speak to people already in the market to understand how much you can charge for your rental.

You should also speak to local letting agents to understand the demand in the area. This is a crucial step, as it’ll help you to put together a projection for your rental income, which lenders will use to assess your mortgage affordability.

Airbnb mortgages

In the UK, some lenders offer mortgage options for homeowners who want to put their properties on Airbnb for short-term stays. However, these short-term holiday let mortgages may have higher interest rates than a regular buy to let or residential mortgage.

That being said, some lenders allow you to Airbnb your property without a specialist mortgage as long as certain criteria, such as if you plan to rent out your property for less than 31 consecutive days at a time, are met. Your L&C mortgage adviser will be able to advise you should you wish to get an Airbnb mortgage.

Holiday let mortgage repayment plan

As with any other type of mortgage, your repayment plan will depend on the type of mortgage you’ve taken out. If you’ve opted for a fixed-rate, your payments will be the same for the duration of your fixed rate term, which might be 2, 3, 5 or 10 years.

On the other hand, if you’ve gone for a variable rate mortgage, your payments could fluctuate month on month depending on interest rates. You’ll need to consider whether you’d prefer the security of fixed payments, which may be more expensive in the long run, or if you’re comfortable with the uncertainty of variable payments when your rental income may not be stable.

If you’ve chosen an interest-only holiday let mortgage, you’ll only pay the interest each month, with the full amount of the mortgage to be paid off at the end of the term.