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Holiday Let Mortgages

A holiday let property investment can be an exciting way of becoming a landlord but there are a few important considerations before you dive into the world of holiday letting.

Simmonds Mortgage Services will cover what a holiday let mortgage is, how they work, the difference between holiday let mortgages and an ordinary buy to lets, and how to navigate the application process.

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When you are considering purchasing a property with a view to letting it out as holiday accommodation or short term lets, it’s a good idea to speak with a mortgage broker who is familiar with the whole of the market and can point you in the right direction of a specialist mortgage lender for this type of investment.

What is a holiday let or short term let mortgage?

A holiday let mortgage is one which is taken on a property that is let out on a short-term basis to multiple tenants as a holiday accommodation or short term lets. You can get a holiday let mortgage on a new purchase or your existing holiday home that you now wish to rent out.

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How does a holiday let or short term let mortgage work?

Holiday let mortgages require the borrower to meet a few additional criteria that might not be required for a standard residential mortgage or a typical buy to let mortgage. There may be additional costs associated with this type of mortgage including higher interest charges, arrangement fees, and tax implications.

Lending Criteria

Lenders typically require a minimum income level and may have specific criteria for property location, property value, and the applicant’s financial stability.

Rental Income

Unlike residential mortgages, lenders often take projected rental income into account when assessing affordability for holiday let mortgages. The rental income is typically expected to cover a certain percentage of the mortgage interest payments. This may be based on a low, medium and high weekly rental figure, verified via a local letting agent. Some lenders will also base borrowing on a normal tenancy agreement rental figure.

Interest Rates

Holiday let mortgage rates may be higher compared to residential mortgages due to the increased risk associated with seasonal rental income and potentially higher management costs.

Tax Implications

Holiday let properties have different tax implications compared to residential properties or buy-to-let properties. It is essential to seek advice from a tax professional to understand the specific tax regulations and benefits related to holiday let properties.

What is the application process for holiday lets?

To apply for a holiday let mortgage, you will need to have the following information available, although each lender will have their own specific criteria for lending.

Holiday let mortgage eligibility

You’ll need to think about the following questions when making your mortgage application.

Where do you plan to purchase the holiday home?

Some lenders will only lend on properties in England and Wales, whereas others will also allow you to purchase in Scotland.

How much do you want to borrow?

A holiday let mortgage deal will take into account the expected rental income when making affordability assessments on how much you can borrow so you’ll need to check out the rental market to work out how much you can get in rental payments and how many weeks per year it will likely be booked for.

How much deposit do you have?

Many holiday let mortgages will require at least 25% deposit. Check carefully though as some lenders have lower loan to value products so you may require an evener larger deposit.

Is the property leasehold and if so, how long is the remaining lease?

Lenders will typically require a certain number of years remaining on the lease at the end of the mortgage term so this is important information to have available.

How will the property be used?

HMRC has strict rules around how properties qualify as a Furnished Holiday Let for tax purposes. Your property will need to meet those regulations to qualify for a holiday let mortgage.

Get in touch with Simmonds Mortgages Services today

Simmonds Mortgage Services works across the whole of market to find you the right mortgage for your holiday rental property. If you are looking to buy a holiday home to let out, give us a call today and we’ll get the ball rolling for you.

Holiday Let Mortgages FAQ's

Yes, it is possible to let your own home as a holiday home but if you have a residential mortgage on the property you will need to inform your lender who may make changes to your mortgage payments, interest rate, or other terms and conditions. This would usually be for a limited time only.

No, the HMRC regulations stipulate that to get holiday let mortgages, properties must be furnished and available to rent by paying guests for at least 210 days per year. You can however get a second home mortgage but this is not based on rental and is based purely on personal income.

With a holiday let mortgage, lenders look at the average weekly rental rather than monthly or annual rental, the weekly rental in low, medium and high seasons, and then average that out and come out with a figure. They can often use personal income as well.

Yes, it is possible to remortgage a property with a holiday let mortgage. However, eligibility and available options are likely to vary by lender and your personal circumstances.

Yes, you can decide to get either a capital repayment mortgage or an interest-only mortgage for your holiday rental property.

Yes, it is possible to find fixed rate deals. Check with a specialist mortgage adviser.

Yes, holiday let property purchases incur an additional 3% stamp duty so don''t forget to factor that into your overall purchase costs.

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