Can You Use a Buy-to-Let Mortgage for a Holiday Let?

With a rise in holiday home owners, there has been an influx in various questions surrounding deposits, mortgages and the letting market.

But one question that keeps popping up is “can you use a buy-to-let mortgage for a holiday let?". The short answer to this question is: No.

With this in mind, it is important to understand why you can't use a buy-to-let mortgage on your holiday home, and what the alternatives might be.

Find out more about buy-to-let mortgages and holiday letting below.

What is the difference between buy-to-let and holiday let?

Many people assume that holiday letting and renting are the same thing, but there are a number of differences in short term vs long term letting.

Originally, buy-to-let properties were a great investment for those looking to bolster their income. But now with travel and tourism becoming increasingly desirable, holiday letting has become a much more attractive option.

But what is a holiday let? A holiday let allows the property owner to let out their property to different multiple times across the year. Typically those letting out their property will not let it out for more than 2 weeks at a time.

A buy-to-let property is much more static in that the property will only be let out to one occupant at a time for a duration that could last years.

Another big difference between letting out a property long term in comparison to a holiday let, is that holiday let properties can generate much more income. This is due to the fact that customers will only be renting out the property in small stints, meaning they will be more open to spending more for the pleasure of staying at your luxury home.

For the buyer to acquire a holiday let mortgage on their property, the home has to be furnished as a holiday accommodation and be available to let out for at least 210 days a year.

Why you can not use a buy-to-let mortgage on your holiday let

If you’re a new property owner that was hoping to use a buy-to-let mortgage type on your holiday let, you might be disappointed when you learn that things aren’t as straightforward as you thought.

But why can’t you use a buy to let mortgage on your holiday property? There is very little answer surrounding this question, making your letting journey more frustrating than it has to be.

One of the main reasons for why you cannot use a buy-to-let mortgage on your holiday let is because your holiday let is going to be treated as a business. With this in mind, you could potentially come across higher interest rates and holiday let mortgage deposits as a result.

Your property is going to be offered out to multiple guests over a short period of time in comparison to a typical property let. This means that mortgage providers will see your property as a form of capital gain that generates a large amount of income.

What mortgage is available to me on my holiday let?

As you can’t use a typical residential mortgage or a buy-to-let mortgage, you may be wondering what mortgages are available to holiday let owners.

If you were to approach a mortgage provider about a mortgage for your holiday home, you will likely be offered a holiday let mortgage. On very rare occasions you may be offered a holiday home mortgage, but this is for those who are only going to bet letting out their property every now and again.

What is a holiday let mortgage?

In a similar way to a buy-to-let mortgage, a holiday let mortgage provides a potential buyer with the finances to purchase a property with the intention to let that property out.

When applying for a mortgage on your holiday home, your mortgage provider will access your income, outgoings and existing mortgages before offering you a suitable mortgage.

A holiday let mortgage is tailored for buyers who are looking to let their property out as a holiday home. Be aware, this is a different kind of mortgage to the similarly named ‘holiday home mortgage’ which is a specific mortgage type that does not allow for the home to be let out.

If you're looking for more information on holiday let mortgages, you can find out more in our complete guide to holiday let mortgages.

If you're looking to apply for a holiday let mortgage, our Holiday Rental Income Estimate Letter service will help you along.

Holiday let mortgage criteria

For the mortgage to be classed as a holiday let mortgage, the property must be available to let for at least 210 days per year. But on top of this, there is more requirements that need to be met in the holiday let mortgage criteria:

Deposit: A holiday let mortgage deposit can be a little bigger than other mortgage types that are available. For this type of mortgage, you will need a minimum of 25%.

Existing mortgage: Mortgage providers will check your existing mortgages before lending you money for your holiday let mortgage to ensure that you are not taking on multiple large mortgages at once.

Financial income: As is the case with most mortgages, the provider will also check your financial situation to ensure that your income can financially support the mortgage payments.

Looking for more information on the holiday let mortgage criteria? Check out our blog how to qualify for a holiday let mortgage.

Changing from a buy-to-let mortgage to a short term holiday let

If you eventually decide that renting your property on long term basis just isn't for you, there are ways for you to change your mortgage from a buy-to-let mortgage to a holiday let mortgage.

• Check the terms and conditions of your mortgage. Some mortgage providers require a tenancy of at least 6. This could mean that a holiday let mortgage may be out of reach.

• Check your insurance. On top of checking your terms and conditions, ensure that you are not breaching any agreements in your insurance policy as well.

• Remortgaging your property may be a solution to ensuring that you can legally let your property out as a holiday let.

• Get the correct licensing. Have you heard of the House of Multiple Occupation license? This ensures that you are allowed to short term let your property out to 5 or more people at one time. Failure to provide this license when asked can result in a large fine.

• Approach with caution! If you don't get permission from your mortgage provider, you could be hit with massive fines or worse. Don't risk it, check with your mortgage provider first and understand your agreement

  

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Disclaimer

The information contained in this article was accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time, so please contact our prospective new owner team if you’d like to hear how. Nothing in this article constitutes the giving of financial, tax or legal advice to you; please consult your own professional advisor (accountant, lawyer etc). in this regard. If we have referred within the article to a third-party provider of unregulated holiday let mortgages, this is due to the fact that such mortgages aren’t currently regulated by the FCA. As a helpful reminder, your home may be repossessed if you do not keep up repayments on a mortgage, so again anything you decide to do in this particular area this is one on which you should take your own professional advice on too, as we aren’t providing and can’t provide you with this.