Financing a Holiday Let

I hear so many stories that financing a holiday let is difficult, problematic and much more expensive than a standard buy to let mortgage.

Myths and misconceptions. Bain of my life as many potential investors back away from buying a property as a holiday let (or short term let) because they have been told one thing when the reality is somewhat different.

The trend for domestic vacations and the demand for small investors wishing to acquire a property to let on a short term basis is increasing. No surprise really when you consider the statistics around UK holidaying, in 2021 visits to Shropshire were up 211% and Wiltshire up 343%. The traditional short break areas of the UK are seeing massive growth.

This demand is driving the desire of property investors to buy holiday and short term let properties. Remember, most of theses investors are smaller landlords rather than large corporate entities, this means that many of these potential buyers are open to the myths that getting a mortgage for a short term let is more difficult.

For mortgage purposes a holiday let is a property that is not your main residence, is not let out on a standard AST and is let for a short period by different occupants across the year.

Common Myths

Let me dispel the common myths about mortgaging a property you are going to let on a short term basis:

Any Buy To Let Mortgage is Fine

Err, no it isn’t. A standard buy to let mortgage assumes that the property is being let on a standard assured shorthold tenancy (AST). This means the lender knows an income is achieved monthly and that they can take the property back on expiry. Most standard buy to let mortgages don’t allow for you to let the property as a holiday let or on a short term basis (daily, weekly, monthly etc).

Believe it or not, lenders do check. There are automations that can check the common listing and booking sites, meaning that lenders can find out and will call the loan in.

If you’re wondering why lenders react like this and see a buy to let and a short term let very differently, this post covers why.

I Need Experience

No you don’t. You don’t have to already own another buy to let or investment property, there is no requirement to have a track record of property ownership. You will need to show you have thought things through and worked out the income and costs, but you don’t need to have a track record of owning other properties.

If you are wondering what you need to show and cover off when applying for finance then this post will help.

I Have to be a Homeowner

No you don’t. It always helps if you are but you don’t have to be. The key here is that the proposal needs to make sense and obviously be a short term let rather than somewhere you are going to live.

Showing this to be the case is about explaining the purchase and showing why it makes sense. If your job is in one place and you are staying there, and the property you are buying is in a sensible location then you should be OK. Add to that your research into what sites you will list on and it makes sense to the lender.

Mortgages For Short Term & Holiday Lets

In short, the demand for short term lets has increased and lenders are more aware that, with sites such as Airbnb or Vrbo, the managing and booking of short term rentals is much simpler, as such lenders are more open to lending for this type of unit.

If you want details or want to know more about how to finance your next property purchase then please get in touch.

By Dave Farmer