Holiday Let Mortgages

Many entrepreneurial property clients see holiday lets as a fantastic investment. Presently, albeit this could change, there are tax benefits when compared to a standard Buy to Let (BTL) property. Generally, short-term holiday letting gives a better return, but there is the risk of higher void periods and a greater risk of wear and tear, and it can be seasonally reliant.

When it comes to making this investment, the first decision is to ensure the property is in an area that has great demand and decide your target audience.

There are fewer Holiday Let lenders in this space when compared to BTL lenders. Some lenders are not keen on the “Airbnb” solution and therefore you need an expert independent mortgage broker, such as us, to expertly guide you through this type of Holiday Let Mortgage. We will explain the deposit requirements and rental assessments from each lender allowing you to make an informed decision.

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Holiday Let

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Please Explain What a Mortgage for a Holiday Let Is?

A holiday let mortgage is a loan designed specifically to finance the purchase or renovation of a property intended for use as a holiday home to be rented on a short-term basis to holidaymakers in the UK.

 

Can I Stay In My Holiday Let Property When I Have a Mortgage?

Yes, there are a couple of options for arranging the Holiday-Let mortgage. If you want to rent it to holiday-makers most of the time, then this is one type. However, if you intend to mainly live in the property but rent it occasionally, such as high-season only, this is another type of Holiday let mortgage. Both lenders will underwrite using different criteria, as one will be based on the rental income and the other on your income.

 

Can I Do a Standard Buy-To-Let Mortgage if I Intend to Let to Short-Term Tenants?

No, you cannot. A Buy-to-Let mortgage is for landlords renting long-term (typically a six-month Assured Shorthold Tenancy (AST) contract). As Holiday Lets are generally seasonal, the rental calculations are different, and a Holiday Let Mortgage is the solution for you.

 

Are Rates the Same Between a Buy-To-Let and Holiday Let Mortgage?

A Holiday Let, due to added wear and tear and higher risk due to the short-term nature of guests, is generally a little more expensive with fewer providers willing to lend. The good news is that these have become popular recently, and more products are available, meaning a competitive market that has resulted in competitive mortgage pricing.

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Having used Jeff as my mortgage advisor a few years back we returned for some advice on a new mortgage application and were dealt with efficiently and with all the advice we needed to get a great mortgage deal. The follow up care from Val was exceptional, always prompt to follow up on every query and provide all the additional info we needed to complete the whole process as painlessly as possible. Would thoroughly recommend them both to everyone! Thank you again.
Irene A

Can I Have a Limited Company Holiday Let Mortgage?

Yes, this is now possible. Owning in the name of a limited company has benefits, and several lenders will accept these now. Specialist advice is required, and we would love to help.

 

My Holiday Let Is Generally to Rent, but I Want to Spend Time There – Is This Possible?

This is possible as many lenders put a condition on the mortgage that you can stay there for a maximum period of time. There is a range, but 40 – 90 days is commonplace.

Can I Use Airbnb, as I Know Lenders Don’t Like This?

You were correct that some time ago, lenders did not like AirBnB, but times have moved on, and lenders who specialise in the Short-Term Holiday let market are happy for their borrowers to advertise on this and other portals.

 

What Are the Tax Benefits of Holiday Lets Compared to a Standard Buy-To-Let?

The government have increased the tax for Buy-to-Let landlords in recent years. Many Landlords are leaving the market because of it. However, one of the key reasons Holiday Lettings have become ever so popular is because they were exempt from these tax changes.

You can continue to claim the full mortgage interest for a furnished holiday and most of the associated costs to run the property, including wear and tear. This is because a Holiday Let is considered a business for tax reasons and a Buy-to-Let as an investment; therefore, both have differing tax legislation.

Other tax advantages are pension rights, Business Property Relief (BPR) and Business Asset Disposal Relief, where you could pay 10% when the property is sold rather than a higher rate of Capital Gains Tax – please speak to an accountant for tax advice before you commit as tax legislation changes.

To benefit from these tax advantages, your property must be made available and actively marketed for at least 210 days per year and rented for 105 of these, but you cannot rent to one guest for more than 31 days (as it won’t count towards the total).

 

What Would a Typical Rental Income Assessment Look Like for Holiday Lets?

When you buy a short-term holiday let, you will need to know the estimated rental income for your business planning and the lender to decide on the maximum advance to offer you. A typical assessment is based on low, mid and high (peak) seasons. A lender may accept a certain number of weeks per year as it is unlikely to be rented for the entire year.

Rental assessments vary, but a lender would want to see the rent cover between 125% and 145% of the monthly interest payments at a specific interest rate (not necessarily the fixed rate) known as a stress test.

Confused? Holiday Let mortgages are complex, which is why expert advice comes highly recommended!

 

Can I Do Interest Only for My Holiday Let Mortgage?

Yes, you can do repayment or interest only. The former may help pay down the loan and give you higher equity, whereas the latter will provide you with a better income.

What Is the Maximum I Can Borrow on a Holiday Let Mortgage? Many lenders will lend 75%, but there are many criteria checks and points to consider, such as rental income, your income, your experience as a holiday let landlord, the type of property, marketability of the property, and location, to name a few.

Will Holiday Let mortgages consider bigger £1m properties?

Yes, in fact, there are many exclusive holiday resorts, such as Lakes by Yoo and Lower Mill Estate, where they have extensive properties worth considerably over one million pounds. These properties are popular and rent for a premium to holiday-makers. Holiday Let lenders calculate lending on many commercial factors, including rental income. If the properties are a good investment, then lenders are more likely to lend.

 

How Will Conran Mortgages Help Me When I Buy My Holiday Let?

These mortgages are highly complex and have lots to consider. As mortgage experts and fee-free independent mortgage brokers, we will do the legwork, so you don’t have to.

Our job is to get mortgages through as seamlessly as possible, and we are the best placed to do this. We will support you and answer any questions and concerns you may have. 

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What customers say

  • Marianne C

    I've been using Conran Mortgages for 10 years now and Jeff and Valerie (great team) have always gone above and beyond to help me secure the best deal. For either new property or remortgaging. You don't need to be using Conran estates to be buying or selling to use their excellent service.

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    Jeff and Val are by far the best brokers I have dealt with! I looked for a while and compared the best. These guys were actually recommended through my estate agent. They are a font of knowledge and made the process so smooth for me. I am able to go to them for all sorts of advice and they break things down into things that are understandable for me. There is a reason they are 5 stars! Their communication is second-to-none, answering emails in a timely fashion, and I have already recommended them to everyone I know who is looking to buy a property at the moment!

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    We had an incredible experience with Jeff & Valerie our mortgage advisor. Their expertise, communication, and dedication made our home buying journey stress-free. They simplified complex concepts, secured the best rates, and provided exceptional support throughout the process. Highly recommended!

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    Conran mortgage brokers have been fantastic - Valerie has been our main contact and has been an incredible support with not only finding us the best deal, but also helping us with revisions / updates due to unplanned changes during our chain. Valerie, Simon and the team are experts and we've really valued their advice in helping us throughout the home buying process. They're extremely professional, responsive and no request is too much for them. I couldn't recommend them more!

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    It’s not Conran that keeps me coming back to Jeff, it’s Jeff! The 5 stars represents his professionalism and commitment to getting the best deal he can. He’s knowledgeable, efficient, and great to deal with; he’s a lovely man.

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    Over the last 15 years, Jeff and Val have helped me with the sale and purchase of 3 properties plus remortgages. I have always received a fantastic professional service with a smile. Highly recommend.

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