Holiday Let Mortgage
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Holiday Let Mortgage
Oliver Potter talks us through holiday let mortgages.
How do holiday let mortgages work?
Holiday let mortgages have become quite popular in recent times. They are specifically designed to buy a property to let out on a short-term basis to holidaymakers. Using something like Airbnb, you might have someone in the property for a week, and then perhaps it’s not rented out the next week.
Mortgage lenders assess affordability based on projected rental income, not usually your personal income.
The main difference between a holiday let and a standard Buy to Let mortgage is that the rental projection comes from a registered holiday letting agent. The property also needs to be in a desirable area for holidays.
Is it hard to get a holiday let mortgage?
It’s no harder than any other Buy to Let mortgage, but these mortgages are slightly different. Lenders could potentially be stricter, but it’s far from impossible.
The lender pool for holiday lets is growing, but it’s smaller than for standard Buy to Let mortgages. It usually requires quite a strong credit history and a decent deposit.
As with standard Buy to Let, you tend to need a minimum of 25% deposit. A good rental yield projection makes approval easier, as the higher the rental yield, the more you can borrow.
Rental projections on a holiday let are worked out across the low season, mid season and high season – there’s usually an average, annualised figure. That’s one of the reasons lenders rely on holiday letting agents, because they have reference points for different seasons.
What’s the difference between a holiday let and a Buy to Let?
They’re both rental properties, technically, but standard Buy to Let is usually for a long-lasting tenant – a specific individual or family on a minimum 12-month contract. You know who they are and you have an agreement directly with them.
A holiday let only has short-term guests. They aren’t seeking a property for 12 months, just a home for a weekend, a week or a fortnight. Usually a holiday lettings agent is involved because of the potential complexities and high guest turnover.
Do you need a licence for a holiday let?
In most areas, you won’t need a licence. That’s true as we speak today in October 2025. Some regions are potentially looking at introducing registrations and licensing, but at the moment, most areas don’t require this.
Wherever you’re buying a property, check local council rules, because these can vary quite a lot. Also, make sure that the area has adequate demand – don’t buy in an area where people won’t choose to holiday.
What are the lending criteria for a holiday let?
One of the big things is deposit. With most rental properties, and holiday lets in particular, you’re going to need a minimum deposit of 25%. If you put less than 25% down, it can get quite expensive.
Rental income is the main factor when it comes to affordability and stress testing. It’s based across an average of the low, mid and high seasons to give the lender a good picture, rather than picking one season or the last three months. There also has to be sufficient holiday demand. Not all parts of the UK are appealing for a holiday.
There may also be a minimum personal income – even though income isn’t used necessarily in the affordability process, lenders like to know that you can cover rental voids. The income requirement is usually £25,000. Lenders may take into account other rental property incomes if you have them, but more usually it’s employment or self-employment.
How much can I borrow and how much deposit do I need?
Always talk to a broker regarding rental properties, because the affordability calculations aren’t as straightforward as with residential purchases. They’re based on rental incomes and vary, depending on the product, lender, deposit and Loan to Value.
If you’re interested in buying a holiday let, it’s always good to have rough figures around the type of property you want – with a rough rental appraisal. We can then give you rough estimations of costs and the threshold rent we’d need to show. That’s usually a good way to do things.
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Are holiday let mortgages more expensive? What costs are involved?
Mortgage rates are usually a little bit higher than the standard Buy to Let model because there’s a smaller lender pool at this level of nicheness. Rates will be a little bit higher – not astronomically, but more than standard Buy to Let rates.
But hopefully that comes with a higher rental yield. Arrangement and product fees will vary depending on different products. There may also be valuation fees and legal costs for solicitors to confirm everything.
A holiday letting agent will run through the general costs of letting the property – there are usually higher running costs such as cleaning, management, bookings and insurance. Maintenance is also going to be higher, as you need to keep the property looking good.
Do you pay stamp duty on a holiday let?
Yes, stamp duty applies and if it’s an additional property, there’s a 5% second home surcharge. That’s the case as of today in October 2025.
Whatever property you’re looking at, we’ll run through what the stamp duty will be, so you’ll be well-prepared.
Do you have to pay council tax on holiday lets?
It depends. If it’s available to let for more than 140 days a year, it’s often classed as a business and you may pay business rates instead of council tax. Some areas offer small business rate reliefs which reduce those costs.
A holiday letting agent will be able to give you specific advice here, as they will specialise in the surrounding area.
What expenses can I claim on a holiday let?
Obviously, I can’t give tax advice, but I can point you in the right direction. Potentially you can claim for mortgage interest, as it can be deductible on a furnished holiday let. You can also include running costs like cleaning, laundry, utilities, repairs, insurance, marketing… all the things that make the business run.
Even though there are fewer reliefs than we might like on rental properties generally, holiday let expenses can be more easily claimable.
Capital allowances may also apply for furniture and equipment. Speaking to a qualified tax advisor in conjunction with us is the most sensible approach.
How do I apply for a holiday let mortgage?
It can be a good idea to find a property and explore what rental yield and demand it would have in the area, by talking to a local holiday lettings agency. The other way around is for us to give you rough ballpark figures and you then go out and find the property.
Once the property’s found and rental figures look good, we would assess your deposit and whether you meet the minimum income thresholds. We then apply for the mortgage, based on a product you’re happy with.
Next, standard procedure takes over. The lender will value the property to make sure it’s reasonable security, then they run an affordability assessment and a credit check. Once all that’s taken care of, the lender will give you a mortgage offer to say they’re happy to lend the money. Then, the solicitors confirm everything legally and put a charge on the property.
How can a mortgage broker help?
A lot of the time, brokers have access to niche lenders that you won’t see on the high street. We can potentially offer advice on licensing, regulation, insurance and give you a basis for how to choose and purchase the property.
We can run affordability tests to see how much you’re likely to be able to borrow and make sure you don’t over commit.
It’s very hard to know what’s possible and what’s not with these specialist products, so always talk to an expert. We’ll make the process as smooth as possible.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE SOME FORMS OF BUY TO LET AND HOLIDAY LET TO BUY MORTGAGES.