Holiday let mortgages

One financing option that stands out as the most suitable for purchasing a holiday let property is the holiday let buy-to-let mortgage. In fact, it is the only option specifically designed to meet the unique needs of short-term rental investments. While other financing options may exist, they often fall short in terms of providing the ideal solution for purchasing a holiday let property.

This type of mortgage is specifically designed for investors who wish to invest in a property with the intention of renting it out on a short-term basis, listing them on platforms like Airbnb. Unlike traditional buy-to-let mortgages, holiday let mortgages have their own unique requirements to have a mortgage approved and operate in the holiday rental market.

A holiday let mortgage, also known as an Airbnb mortgage, is a specialised mortgage product tailored for those looking to purchase a property specifically for holiday rentals.

This type of mortgage takes into account the expected income generated by renting out the property on a short-term basis, allowing you to have the potential for bigger returns than a standard buy-to-let property.

1. Research and Planning: Start by researching popular holiday destinations and areas with high demand for short-term rentals. Consider factors such as:

• proximity to attractions,
• amenities,
• transport links,
• seasonal demand, and
• the average price per night in the area for the type of property you want to let

2. Financing Options: Once you have researched your are and are clear on the property values and the likely rental income achievable, both seasonal and long term rental, we will source the market and provide you with the best interest rate, terms, and repayment options for your investment.

3. Property Search: Begin your property search, keeping in mind your budget and target market. Engage with local estate agents or browse online platforms to find properties that have more chances of being in demand for short-term rentals.

4. Property Evaluation: Once you identify a potential property, conduct thorough due diligence. Assess its condition, location, and potential rental income. Consider factors like occupancy rates, local regulations, and any renovation or furnishing requirements.

5. Mortgage Application: Prepare the necessary documentation, such as proof of income and bank statements and we will recommend and apply for your holiday let mortgage on your behalf. We process and hold your hand through to completion.

6. Legal Considerations: Seek professional advice from a solicitor or conveyancer to ensure a smooth transaction. They will handle the legal aspects, including property searches, contracts, and title transfers.

7. Insurance and Management: Protect your new asset with holiday let insurance. Consider employing a property management company or handle bookings and maintenance yourself.

8. Marketing and Bookings: Create an enticing listing for your holiday let property. Some landlords use the power of online platforms and social media to reach potential guests to maximise their occupancy rates.

Holiday let properties can provide higher rental yields and the flexibility to use the property for personal vacations. However, they may require more active management and can be subject to seasonal fluctuations. On the other hand, buy-to-let properties offer long-term stability and a potentially wider tenant pool. Bear in mind that you will need different mortgage products depending on the type of strategy you choose, and the rates tend to be lower for standard buy-to-let mortgages.

You will need to consult an accountant for specific advice but holiday mortgages have become more popular as they offer the ability for landlords to deduct all of the interest from the rental income before calculating profit, unlike standard buy-to-let now.

While these criteria may vary among lenders, common factors include:

• A minimum property value
• A maximum loan-to-value ratio
• A minimum rental income requirement
• Proof of experience as a landlord or property owner

The minimal rental income required in this case can demand a little bit more math than a regular buy to let property. By knowing your average annual rental income, the lender will calculate your affordability. First, you need to discover the potential average yearly income across different seasons:

Low season rental + middle season rental + high season rental / 3 =
average rental income

The lender will assume an occupancy rate of 70% in a year (or 30 weeks yearly).
Your yearly rental income will be the average income across different seasons multiplied by 0.7.
With that number in mind, most lenders will require that the property can yield a minimum rental income of 145% of the interest monthly payments.

The good news is that lenders for a holiday let mortgage tend not to ask for a minimum personal income to approve a holiday let mortgage.

Before entering the holiday let market, it is recommended that you study the relevant regulations. Local authorities may have specific rules regarding short-term rentals, such as registration requirements, safety standards, and tax obligations. Compliance with these regulations will ensure a smooth and legally compliant operation.

Investing in a holiday let property can be a lucrative business, providing both financial returns and the opportunity to create unforgettable experiences for guests. With the right knowledge and a well-structured holiday let mortgage, you can turn your dream of owning a holiday rental property into a reality. Remember to conduct thorough research, understand the market dynamics, and let us guide you in choosing the mortgage product that aligns with your investment goals.