How Holiday Let Mortgages Differ
Holiday let mortgages are a niche product distinct from both residential and standard buy-to-let mortgages. The property is let on a short-term basis — typically weekly — to holidaymakers rather than on an assured shorthold tenancy to a long-term tenant.
Because holiday lets have variable occupancy and income, lenders view them as higher risk. Fewer lenders offer holiday let mortgages, deposits are typically larger (usually 25% to 40%), and rates may be higher than standard BTL products. However, the potential income from a well-located holiday property can significantly exceed standard rental income.
Eligibility Requirements
Most holiday let mortgage lenders require you to own your own home, have a minimum personal income (typically £25,000 to £30,000), and demonstrate a credible letting plan. Some lenders require evidence of projected income from a holiday letting agent, while others accept your own income projections based on comparable properties in the area.
The property must be suitable for holiday accommodation and located in an area with tourist demand. Lenders may be cautious about properties in remote locations with limited letting potential. Experience in property letting is preferred but not always required.
Tax Advantages of Furnished Holiday Lets
If your property qualifies as a Furnished Holiday Let (FHL) under HMRC rules, you can access tax advantages not available to standard buy-to-let landlords. These include full mortgage interest deductibility (not restricted by Section 24), capital allowances on furnishings and equipment, and favourable capital gains tax treatment including Business Asset Disposal Relief.
To qualify as an FHL, the property must be available for letting for at least 210 days per year and actually let for at least 105 days, with no single letting exceeding 31 consecutive days. The property must be furnished to a standard suitable for normal occupation. Note that FHL tax rules have been under review, so check the latest HMRC guidance or consult an accountant.
Management and Running Costs
Holiday lets are more management-intensive than standard buy-to-lets. You need to handle bookings, guest changeovers, cleaning between stays, maintenance of furnishings and equipment, marketing the property, and dealing with guest queries and issues.
Many owners use holiday letting agencies or platforms like Airbnb, Booking.com, and Vrbo to manage bookings, though commission charges of 15% to 25% apply. Running costs are higher — including utilities, Wi-Fi, TV licences, contents insurance, and regular replacement of furnishings and consumables. Model these costs carefully before projecting income.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.