Holiday Let Mortgage Options: Finance for short-term lets and Air Bnbs

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What is a holiday let mortgage?

Many people are attracted to the idea of buying a property and renting it out as a holiday let.  Whether you are dreaming of a cottage by the sea or an apartment in a city, a holiday let mortgage can help you achieve your dream. 

A holiday let mortgage is a type of finance used to buy properties to let out as holiday accommodation. It differs to a holiday home or second home which is for personal use. It’s also different to a buy to let  which you let out to individuals or businesses.  
Holiday let properties are only let for a short term – usually days or weeks. If you wish to buy a holiday home and require finance you will need a holiday let mortgage. You’ll also need a holiday let mortgage if you want to remortgage or convert a property into holiday accommodation. 

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What’s the difference between a holiday let mortgage and a standard BTL mortgage?

Holiday let mortgages are available for properties used as holiday accommodation. Properties of this type are typically let out on a short-term lease to tourists. In comparison, with a standard buy to let mortgage the property is normally let out for 6-12 months. – The income derived from each situation also differs. The rental income from a holiday let mortgage tends to be higher with different rates applied depending on the season.  

For example, in the peak summer months, landlords can charge more for their property than in the quieter winter months. A buy to let landlord charges a set rate, by the month for the duration of the tenancy agreement. But whilst landlords can charge more for a holiday let, there is a higher risk that the property might be empty during quieter periods. This can make earnings from rental income less consistent over the year. 

Rental income is a key consideration for lenders when deciding how much to lend. With a buy to let mortgage a lender uses rental projections for the year based on the property’s rental valuation. When considering a holiday let mortgage application, some lenders may review the potential rental yield based on the low, mid and high season rates. If required, the lender may also take your personal income into consideration along with any relevant landlord experience. 

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How to get a holiday let mortgage?

If you are considering applying for a holiday let mortgage, we strongly advise that you don’t go it alone. Holiday Let mortgages are a specialist type of finance which can have additional criteria that you need to meet. It’s for this reason that we recommend you speak to an experienced mortgage adviser to get personalised advice. Speak to our friendly team today, who can help you find the right mortgage for your circumstances. 

To get approval for a holiday let mortgage, you will need to meet the lender’s mortgage criteria. This is a set of rules which confirms what type of property they will lend on and what the minimum requirements are for you as the borrower. 


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Holiday Let Mortgage Criteria

The exact mortgage criteria varies from lender to lender, but generally speaking you will need to meet the following: 

  • Have a minimum deposit of 25%
  • The requested borrowing will need to be within the lenders limits
  • May have to pass a minimum income threshold from your personal earnings (separate from the projected income from the holiday let)
  • Have sufficient rental income to cover between 125% and 145% of the mortgage payment
  • Most lenders will not allow you to borrow past a certain age (often 85)
  • If you own several BTL or holiday lets, there could be limits with respect to the size of your property portfolio.
  • The property construction type is acceptable to the lender
  • The property will usually need to be available for let for a minimum of 210 days per year and let for at least 105 days a year.
  • Some lenders may require that you manage the property via a letting agent who promotes holiday lets 

Is it hard to get a holiday let mortgage?

Some borrowers can find it harder to secure a holiday let mortgage compared to other types of finance. This is because there are less lenders who offer holiday let mortgages compared to other types of mortgages. As there is less competition in this market and because lenders consider holiday lets as higher risk, interest rates tend to be higher. The lender’s mortgage criteria can also be more stringent as they will want to ensure that the mortgage will still be paid, even when the property is not let out. This is why it’s so important that you work with a mortgage advisor who is an expert in the field. Contact our mortgage team today for advice about applying for a holiday let mortgage. 

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Can I get a holiday let mortgage via a limited company?

Yes, it is possible to take out a holiday let mortgage via a limited company or SPV (Special Property Vehicle). There are some benefits to buying a holiday let through a limited company instead of an individual’s name. If you intend to build a holiday let or extend your current BTL portfolio, operating through a limited company can make things easier to manage. By utilising HMRC’s Furnished Holiday Let definition it’s also possible to reduce the amount of tax you pay (Until April 2025). By buying through a limited company, you can build your holiday let business and potentially pay less in tax. It’s worth noting however, that you don’t have to set up a limited company to take out a holiday let mortgage and can do so in your own name. The same tax benefits still apply whether you are a limited company or sole trader however the arrangement is due to end in April 2025 so that’s worth bearing in mind. It’s best to get personal advice from a property accountant. If you don’t have one, we can introduce you to one. 

Tax benefits of holiday let mortgages

One of the factors that attracts landlord to holiday let properties are the potential tax benefits. For properties that qualify under the Furnished Holiday Let definition, landlords can benefit by paying less tax until April 2025. To be eligible for the FHL benefit the property must be fully furnished, available to let a minimum of 210 days per year and let for at least 105 days per year. Owners of properties that have FHL status can offset mortgage interest and some other running expenses against their profits reducing the amount they have to pay tax on. For more information on the tax benefits that may apply to you, speak to a professional accountant. 

UPDATE: Following the March 2024 budget, the chancellor has announced that they are abolishing the furnished holiday let tax regime with effect from April 2025. This means that landlords will no longer be able to deduct the full cost of their mortgage interest payments from their rental income. They’ll also be no longer entitled to claim capital allowances or pay lower capital gains tax (CGT) when they sell or get rollover relief. To find out more about how this will affect you personally, please speak to your accountant. 

Can I get a holiday let mortgage for an Air BNB property?

One common question that gets asked is whether it’s possible to use a Holiday Let mortgage for a property you intend to let via Airbnb. Airbnb allows homeowners to rent out a room or their whole house to guests who have booked through the Airbnb website. If you do intend to rent out the entire property to guests, you may need a holiday let mortgage. Unfortunately. not all lenders who offer holiday let mortgages will provide mortgages for Airbnb properties which can be an issue if you are remortgaging. Fortunately, there are a select number of lenders that will lend on Airbnb properties – speak to our expert mortgage team to find out more. 

Secure your holiday let mortgage with expert advice from Simple Fast Mortgage

Holiday let mortgages are a specialist type of mortgage lending and so we appreciate that it can all get a bit overwhelming. There’s certainly a lot to think about which is why it’s so important to speak to an expert who can guide you through the mortgage process to make it as hassle free as possible. That’s where our team of expert mortgage advisers come in, we have over 20 years of experience of helping customers achieve their property plans and we can find the mortgage deal that is the perfect fit for you. Contact us to start your holiday let mortgage application today. 


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