Holiday Let Mortgages
If you’re buying a UK property to let out to holidaymakers on short-term bookings, a standard residential or buy-to-let mortgage isn’t the right product – you’ll need a dedicated holiday let mortgage, assessed differently to reflect the seasonal, short-stay nature of this kind of letting.
Based Overseas Rather Than in the UK?
Our Expat Holiday Let Mortgages page covers the specific considerations for overseas-based owners, including the higher deposit and rate premium typically applied to non-resident applicants.
What Is a Holiday Let Mortgage?
A holiday let mortgage is specifically designed for a furnished property let to paying guests on short-term bookings – typically ranging from a few nights to a few weeks – rather than a standard assured shorthold tenancy. Neither a residential nor a standard buy-to-let mortgage permits this kind of short-term commercial letting, so lenders offer a genuinely distinct product to cover it.
Deposit Requirements
Most holiday let lenders require a deposit of 20-30%, generally higher than a standard buy-to-let mortgage, reflecting the higher perceived risk of fluctuating seasonal income and potential vacancy periods. On a £300,000 property, this typically means a deposit of £60,000 to £90,000.
Minimum Property Value
Some lenders apply a minimum property value for holiday let lending, commonly around £200,000, and exclude certain property types entirely – holiday parks or complexes, guest houses being run as a business, and properties subject to restrictive covenants on title or occupancy are typically outside what a standard holiday let mortgage will cover.
How Rental Income Is Assessed
Given the seasonal nature of holiday letting, lenders typically use a projected income figure based on low, mid, and high season estimates, often obtained from a specialist valuer or local letting agent rather than a single flat annual figure. This projected income generally needs to cover the mortgage interest payment by 125-145% at a stressed rate, similar in principle to standard buy-to-let assessment but built around a more variable income picture.
Personal Income Requirements
Unlike some standard buy-to-let products, most holiday let lenders also require a minimum personal income – commonly £25,000 to £40,000 a year – alongside the projected rental income, to ensure mortgage payments can be maintained during quieter, lower-occupancy periods of the year.
The Furnished Holiday Let Tax Regime Has Been Abolished
It’s important to understand clearly that the Furnished Holiday Let (FHL) tax regime, which previously offered specific tax advantages for qualifying holiday let owners, was abolished from 6 April 2025 for income and capital gains tax purposes, and from 1 April 2025 for corporation tax. Holiday let income is now taxed on the same basis as standard residential rental income – the previous advantages around full mortgage interest deductibility, capital allowances on furnishings, Business Asset Disposal Relief on sale, and counting profits as relevant earnings for pension contributions no longer apply.
Why Limited Company Ownership Has Become More Attractive
Because the previous FHL advantages around interest deductibility no longer apply to personal ownership, and the standard Section 24 restriction now effectively applies to holiday lets in the same way as conventional buy-to-let property, limited company ownership has become considerably more attractive for higher-rate taxpayers, since mortgage interest remains deductible as a business expense within a company structure. It’s worth discussing both ownership routes with an accountant, since the numbers can differ meaningfully depending on your personal tax position.
Historic FHL Occupancy Criteria
While the tax advantages have been removed, some lenders still reference the former FHL occupancy pattern – availability for at least 210 days a year, actually let for at least 105 days, with no single booking exceeding 31 days for extended periods – as part of how they assess a property’s suitability for a holiday let mortgage specifically, distinguishing it from a standard long-term rental. It’s worth confirming with your broker exactly what occupancy pattern your specific lender expects.
Personal Use of the Property
Unlike a standard buy-to-let mortgage, which doesn’t permit any personal use of the property, many holiday let mortgages allow the owner a limited number of personal-use days each year – commonly up to 60 days with some lenders – provided the property is still genuinely let commercially for the remainder of the year. If personal use is a significant priority for you rather than a minor occasional benefit, it’s worth discussing whether a second home mortgage might actually suit your circumstances better than a holiday let product.
Interest-Only vs Repayment
Many holiday let mortgages are arranged on an interest-only basis, similar to standard buy-to-let, meaning you’re not repaying the loan balance itself during the term and will need a clear strategy for repaying the capital at the end – typically through sale or refinancing. Fixed-rate deals, commonly for two or five years, are the most widely available structure, though tracker deals linked to the Bank of England base rate exist too.
Which Lenders Offer Holiday Let Mortgages
Not every mainstream lender offers holiday let mortgages – this is a genuinely more specialist part of the market, served by building societies and specialist lenders including names like Suffolk Building Society, Mansfield Building Society, Bath Building Society, Cumberland, Leeds, Furness, Harpenden, Shawbrook, and Paragon, alongside some standard buy-to-let lenders offering holiday let permission as an add-on. Working with a broker with genuine access across this panel matters considerably, since criteria and appetite vary widely between providers.
Regulatory Status
Holiday let mortgages are usually treated as commercial lending and are typically not regulated by the FCA in the same way a standard residential mortgage is. This doesn’t mean the broker arranging your mortgage is unregulated – broker regulation and product regulation are separate things – but it’s worth understanding this distinction clearly.
Short-Term Letting Regulations Worth Being Aware Of
Some local authorities, including Brighton, Bath, and parts of Cornwall, have introduced Article 4 directions removing permitted development rights for changing a property’s use to short-stay accommodation in specific areas, and lenders are increasingly requiring evidence of planning compliance where this applies. A statutory short-term let registration scheme for England is also in active consultation and expected to commence in the coming years. It’s worth checking whether any local restrictions apply to your target property before committing to a purchase.
London Specifically
Dedicated holiday let mortgages are genuinely rare for London property, given London’s own specific short-let restrictions limiting lettings to a maximum of 90 nights a year without planning permission. The more realistic route for a London short-let property is typically a standard buy-to-let mortgage with short-let permission built into the lending terms, rather than a dedicated holiday let product.
Choosing a Location and Understanding Local Demand
Holiday let performance varies enormously by location, season, and property type, and it’s worth researching genuine local demand – occupancy rates, average nightly rates, and seasonality – for your specific target area rather than assuming a picturesque location automatically translates into strong bookings. Established holiday destinations with year-round appeal, good transport links, and nearby attractions generally perform more predictably than more niche or seasonal-only locations, though the latter can still work well if priced and marketed appropriately.
Managing Bookings Yourself or Through an Agency
Some owners manage bookings, guest communication, and changeovers themselves, particularly if living reasonably close to the property, while others use a dedicated holiday letting agency or property manager to handle this, typically for a commission of around 15-25% of booking income given the more intensive turnover involved compared with standard letting. It’s worth being realistic about how much time and availability you genuinely have, since holiday letting involves considerably more hands-on coordination than a standard long-term tenancy.
Additional Costs Beyond the Mortgage
Holiday letting involves meaningfully higher ongoing costs than a standard long-term rental – furnishing to a suitable standard, more frequent cleaning and changeover costs between guests, higher-turnover maintenance, specific holiday let insurance, and ongoing marketing or letting agent commission if you’re not managing bookings yourself. It’s worth researching realistic occupancy levels and income for your specific area and property type with local holiday letting agents before committing, rather than relying on optimistic assumptions.
Remortgaging an Existing Holiday Let
Some lenders will consider remortgaging an existing holiday let property, whether to fund improvements, release equity, or purchase a further property, assessed on broadly similar principles to the original purchase. It’s worth reviewing your options ahead of your current deal ending rather than defaulting onto a lender’s standard variable rate.
Frequently Asked Questions
How much deposit do I need for a holiday let mortgage?
Typically 20-30%, higher than a standard buy-to-let mortgage, reflecting the higher perceived risk of seasonal, fluctuating income.
Do holiday lets still get special tax treatment?
No – the Furnished Holiday Let tax regime was abolished from April 2025, and holiday let income is now taxed the same as standard residential rental income.
Can I use the property myself as well as letting it out?
Many holiday let mortgages permit limited personal use, commonly up to around 60 days a year with some lenders, provided the property is still genuinely let commercially for the remainder.
Do I need personal income as well as rental income to qualify?
Yes – most lenders require a minimum personal income, commonly £25,000 to £40,000, alongside the projected rental income.
Is a holiday let mortgage regulated by the FCA?
Generally not in the same way as a standard residential mortgage, since it’s typically treated as commercial lending – though the broker arranging it should still be FCA-regulated.
Can I get a holiday let mortgage for a London property?
Dedicated holiday let products are rare for London given local short-let restrictions – a standard buy-to-let mortgage with short-let permission is typically the more realistic route.
Should I own a holiday let personally or through a limited company?
This depends on your tax position, and limited company ownership has become more attractive since the FHL regime’s abolition – worth discussing with an accountant.
Should I manage bookings myself or use an agency?
This depends on your available time and proximity to the property – agencies typically charge 15-25% commission but handle the more intensive turnover holiday letting involves.
Get in touch with details of the property and your circumstances, and we’ll help you find the right holiday let mortgage from our panel of specialist lenders.
