Holiday Let Mortgage

Mortgages for holiday lets are ways to finance buying a second home for short term holiday rentals.

Since holiday lets are an investment, and most owners are likely to have a primary residence as well, the rates and deposit requirements on a holiday let can be higher than for a standard residential mortgage on a primary residence. This is because, if faced with sudden financial difficulty, people are more likely to default on payments for their holiday let rather than their primary home. Equally, if a holiday rental business starts to fail, they are more likely to want to get out of the mortgage. Lenders want to avoid situations where they will have to repossess a house and risk losing money, so they increase the rates on this type of mortgage.

When considering buying a holiday let, make sure that you get the right type of mortgage. There are several similar mortgage types but they're not all interchangeable. A mortgage for holiday let properties will be the right type if you don't intend to live in the property yourself but instead expect to rent it out on a short basis to different tenants for the majority of the year. The exact maximum and minimum days can be different depending on where your lender’s criteria.

A holiday home mortgage, or a mortgage for a second home, is not typically suitable for a property you intend to use solely as a holiday let.

However, if you have a residential mortgage on a holiday home would like to let out this property on a short-term basis for less than 7 days, up to 90 days a year, then you shouldn’t need to change your mortgage product. Nonetheless it’s a good idea to contact your lender about their conditions regarding short term letting should this be something you want to do.

Alternatively, if you have residential mortgage on a second home that you want to rent out for more than 90 days in a year and don’t intend to stay in the property yourself, then you may be able to apply to your mortgage lender for consent to let. Consent to let is normally only granted for a year so if you want to continue letting out the property you’ll need to consider remortgaging onto a suitable holiday let or buy-to-let product.

It is usually harder for a first-time buyer to get a holiday let mortgage but it's not impossible. As a first-time buyer, you won't have proof of reliable mortgage payments, so you might be subject to stricter criteria. This is used to counteract the increased risk that first-time buyers present to mortgage lenders. Your mortgage options will also be far more limited than a homeowner.

A lot of mortgage lenders will let you have more than one holiday let mortgage. However, this can still be weighed against your income and the rental income, so there's a limit to how many mortgages you can take on. Of course, not all mortgage lenders allow multiple holiday let mortgages, especially if you also have a residential mortgage.

If you’re looking to buy a holiday let abroad you’ll need an overseas lender that lends on properties in that country. We can refer you to a broker that will guide you through this process.

Yes, you can usually use the holiday let for your own holidays — provided that the property is available to rent for a certain number of days per year. Find out the exact number of days it must be available from your mortgage provider. You can also allow friends or family to use a property as long as the criteria are met. Bear in mind that this will lower your rental income and might put you at risk of struggling with your repayments. If you intend to use a holiday property a lot during peak time, this should be a consideration when calculating whether or not you can afford the mortgage.

If you think that a mortgage is not right for you, you could also fund a holiday let in other ways:

Cash purchase: while this might mean saving up for a while, you would be able to purchase a holiday let outright. This means you'll avoid interest and any other fees involved with getting a mortgage. You also won’t have to worry about meeting lender conditions.

Remortgaging: if you have another property, whether that is your home, a second home, or another investment property, you could look at remortgaging to help release the funds needed to buy your holiday let.