Airbnb and Holiday Let Mortgages: Everything you need to know

Airbnb and Holiday Let Mortgages: Everything you need to know

Looking to Airbnb your property? Need a holiday let mortgage? This guide tells you everything you need to know about getting the right Airbnb mortgage.  

It’s no secret that the short-term rental market is booming. In 2022 alone, there were over 7 million Airbnb listings worldwide, with the company earning over £7.4 billion in revenue

Naturally, savvy property investors are turning to Airbnb to reap the financial benefits. But along with the many benefits, are the many potential pitfalls – particularly when it comes to getting the right mortgage. 

Without following the right borrowing processes, some property owners have found themselves in hot water with lenders. If you’re thinking about, or currently already do Airbnb your property, then you probably want to avoid any of these issues and do things the right way.

As Airbnb management specialists, one of the most common points of confusion we hear from our clients is which mortgage is right for them. So we’ve put together this simple guide to answer some of these questions, and take the guesswork out of Airbnb-ing in the UK. 

Can you get an Airbnb mortgage?

Yes, in the UK you can get mortgages that allow you to list your property on Airbnb. But there are a few different types, so it’s a good idea to ask yourself these questions first: 

  • Are you renting out the whole property or individual rooms?
  • If you already have a mortgage, do you need consent to let from your lender?
  • Will you be living in the property?
  • How often are you planning on renting out the property?

 

Why do I need a specialist mortgage for an Airbnb or holiday let?

A typical Residential mortgage doesn’t usually cover renting out your property, especially if you’re planning on doing so on a frequent basis. Having a specialised mortgage ensures you’re fully covered and avoids any breach of contract. 

 

Can I Airbnb on a Residential mortgage?

Some Residential mortgage lenders will let you occasionally rent out a single room - but if you’ve invested in a property with the purpose of regular letting, this kind of mortgage likely won’t cover what you need. 

 

What type of mortgage can you get for an Airbnb?

The type of mortgage you get depends on the type of property, how you plan to use it, and the lender. Renting out a single room occasionally for example, is very different from renting out a whole house multiple times a month.  

Holiday Let – if you're regularly renting out the whole property

If you have an investment property or second home that you’re planning on letting on a short-term basis throughout the year, you’ll need a Holiday Let mortgage. 

With this kind of mortgage, lenders expect you’ll rent out the whole property, actively market it, and have guests stay with you often.  

Buy to Let – if you’re occasionally renting out the whole property

A Buy to Let mortgage is commonly used if you’re renting out a whole residential property on a long-term basis. This comes with more restrictions than a Holiday Let mortgage, such as the number of days you can rent your property per calendar year. 

A Buy to Let mortgage isn’t advisable if you’re planning on regularly having guests stay, but some Buy to Let lenders do work with holiday lets too, so could be open to the idea. 

Residential – if you’re occasionally renting out a single room

If you were simply occasionally renting out part of your property on a short-term basis, like a room, many providers would be more relaxed around using a normal Residential mortgage. 

But there are stricter limitations on how often you can let each year (usually up to 90 days). 

Do I need to tell my mortgage company I’m planning to Airbnb my property?

If you already have a typical Residential mortgage for your property, then yes, we highly recommend you let your lender know if you’re planning on renting out your property in any capacity.

If you decide to list your full property on Airbnb without confirming with your provider, you risk being in breach of contract and having your property repossessed or needing to repay the mortgage in full. 

How do I change my Residential mortgage to an Airbnb mortgage?

If you want to start renting out an old residential property on a short or long-term basis, you simply need to speak to your current provider.  

Some will give you a ‘consent to let’, which allows you to stay on a Residential mortgage - but you’ll likely be asked to pay additional fees and interest rates. 

If you’re not granted a consent to let, you’ll need to remortgage your property with a different lender. This comes with its own challenges such as early repayment charges. 

How do I change my Buy to Let mortgage to a Holiday Let mortgage?

If you’re wanting to change from renting out your property on a long-term basis to more short-term, frequent rentals, then you may need to change from a Buy to Let to a Holiday Let mortgage.  

This requires you to speak to your current lender about the change, and come to an agreement. If your lender rejects your request to change, you’ll need to remortgage your property with a provider allowing Airbnb Holiday lets.

 

What are typical Airbnb mortgage rules?

While the Airbnb market is thriving, it’s still a relatively new kid on the block. This means there’s often some confusion around Airbnb mortgage rules. Here we take a quick look at some of the common questions. 

 

Can any property be used as an Airbnb?

No, some property types are restricted by contracts, laws and community rules. It's a good idea to check with a legal expert or local authority on your specific location and circumstances. 

Common restrictions are of course around your mortgage, but also geographically. For example, in London you’re only able to rent your property out for 90 days a year. Any longer, and you need to get permission from the local council. 

Will a UK lender cover me for a property abroad?

Yes, many UK lenders can help you get a mortgage for a property overseas. It’s just a case of asking before you go into business with them. 

Can I use my rental income to pay my Airbnb mortgage?

The way you pay your mortgage is mostly up to you, so yes you can use your rental income to pay it off. 

It’s important to know however that when it comes to your mortgage affordability assessment, you’re not likely to be able to use your rental income.  

 

Getting an Airbnb or holiday let market appraisal

For most mortgage lenders to consider granting you a mortgage, carrying out a holiday let market appraisal will put you in good stead. This simply involves getting a written document from a letting agent on the value and/or booking income achievable for your property.

This is especially useful if you’re looking for a more favourable rate or are considering Airbnb-ing in rural or leisure locations that are seasonal in demand. 

What are the typical eligibility criteria?

Eligibility criteria depends on the type of mortgage you go for. 

  • Use of property: whether you’re renting out a whole house or a room will impact your eligibility for a mortgage. Buy to Let mortgages for example have restrictions on the number of days you can rent, and Residential, the number of rooms.
  • Rental coverage: specifically for Buy to Let mortgages, you’ll need to show you’ll have enough income from your rental to stay up to date with payments.
  • Deposit: for anything other than a Residential mortgage, you’ll need a larger deposit. This can vary though, depending on the provider and how competitive of a deal you’re able to get.

 

Which mortgage lenders allow Airbnb in the UK?

Some UK lenders offer Airbnb specific mortgages, but whether you’ll be eligible depends on how you’re planning on using your property.

The good thing is more lenders are becoming flexible around eligibility criteria as the short-term letting industry grows in popularity.  

Lenders like Barclays and Nationwide are more open to offering Holiday Let mortgages, but other banks like Natwest and Santander don’t allow Residential mortgage holders to rent out on Airbnb. 

Work with a specialist mortgage broker

Working with a specialist Airbnb mortgage broker is your best bet for taking some of the pressure off finding the right provider. 

A specialist broker can review your property and put you in touch with the most suitable lenders. They’ll often be able to find you a more competitive interest rate too. 

If you need a bit of help sourcing one, our management team will be more than happy to advise you!

 

Is it hard to get an Airbnb mortgage?

In comparison to a typical Residential mortgage, yes, it’s more difficult. After the instability of the COVID-19 pandemic, some lenders became more cautious. This is where working with a specialist broker should help steer you towards more reliable providers. 

It’s also worth thinking about the additional costs of becoming an Airbnb landlord. Organising and paying for cleans after each guest, and staying ahead of breakages and damages is one thing. But even the time you spend communicating with guests and managing the property can quickly start to feel all-consuming.  

That’s where much like working with a mortgage broker, taking advantage of Airbnb management services that are there to help you is invaluable. 

 
Where do I start?

If you’re ready to move forward with getting the right mortgage for your rental, then our team will be more than happy to point you in the right direction. 

Getting a mortgage is just one essential part of the puzzle. If you’re planning on regularly having guests stay, managing an Airbnb is no small task. The Right Property Group is here to help give you time back, and get the best returns possible. Simply contact us today!