What Mortgage Do You Need For An Airbnb Holiday Let?

During the pandemic we saw more people than ever before holiday in the UK, with rising airbnb holiday bookings which drove many people to purchase second homes and capitalise on the growing trend, and profitability that airbnb lets can offer.

I also, and had always dabbled in the idea that when it was time to move on from my flat that I would convert it to an airbnb and keep it as my second home. 3 other properties in my block were airbnb and pretty much always had around 80% occupancy. I was never interested in a traditional rental because the profit just didn’t make it worth it.

Whilst airbnb creates a lot more overheads, the possibility and long term of it is exciting. The location of my flat is what makes it an incredibly lucrative place to have an airbnb too. Unfortunately not everything stacked up in the end for me, which I will go into more detail, but along this journey I learnt a lot about the mortgages that you are required to have for an airbnb holiday let. If you’re taking out a mortgage and serious about it, then this really is something you don’t want to get wrong as it can cause you to forfeit your mortgage if you get caught doing so without the appropriate mortgage.

What Mortgage Do You Need For An Airbnb Holiday Let?

Specific airbnb mortgages are stIll not that common and not many traditional banks offer this as an option. A standard buy to let mortgage does NOT cover you if you are letting it out as a holiday let. Although you will need to check individually with your prospective lender. If you get caught using a traditional buy to let mortgage but are in fact using it for an airbnb then you can forfeit your entire mortgage. Why are banks so against airbnb lets? Because the opening your property to lots of different people opens you up to even more risk with the safety, and condition of the property. This risk has to be weighed up by the mortgage lenders as they always focus on the resell value of a property, if it was to ever be repossessed, they don’t want to end up in negative equity. Especially if it ended up getting absolutely trashed by a series of guests.

As far as I am aware you need to look for a specific mortgage lender that deals with mortgages catered towards airbnb lets, there are much fewer options than traditional buy to let mortgages and they do carry much higher interest rates. In order to work out the affordability and what they will lend, you need to find out the following;

  • Nightly rate for a stay in the property
  • Average weekly rental figure for the low, medium and high seasons

Of course, if you are yet to do it, how the hell are you going to know this? Firstly, the mortgage lender just needs the numbers, they don’t care where you get it from. But it does pay to be thorough and as accurate as possible. I was fortunate, because I was able to take an average price from the 3 other flats in my building doing airbnb. I would recommend looking on airbnb in your area and working out an average based on what you are looking at.

Secondly, I was stumped when asked to get an average weekly rental figure, I asked airbnb directly and they cannot provide information like this. However, they did point me in the direction of AirDNA which provides short term rental analytics, and is so insightful! You simply search for the specific area you need the information on, but the only downside is you do need to pay for this information. It was only around £16 and I was able to get everything I needed from occupancy rates to average costs. Once I had the average occupancy for low, medium and high seasons I just worked the weekly rental figures out by using the base nightly rate cost.

Traditional buy to let mortgages always request a monthly rental figure that you could potentially make, so I would suggest that all those currently offering airbnb mortgages will ask for the similar information as they need to ascertain what your monthly income could be, and so they can ensure that you’ll be able to cover the monthly mortgage repayments.

What Mortgage Lenders offer Airbnb Mortgages?

As far as I am aware, and from my research with my mortgage advisor, the following lenders are the only ones that currently offer specific airbnb mortgages;

  • Hodge Bank – Holiday Let Mortgages
  • Paragon
  • Principality Building Society
  • Foundation Home Loans
  • Axis Bank
  • Castle Trust
  • Market Harborough
  • Furness Building Society
  • Metro Bank
  • Tipton & Coseley
  • Monmouthshire Building Society
  • Masthaven
  • Teachers Building Scoiety
  • West One

As I mentioned previously, it is still worth checking with banks as to whether their buy to let mortgage allows for holiday rentals. As this form of rental has become more popular in the last couple of years, it won’t be long until this is more widely available. I would recommend seeking out help from a mortgage adviser to help you find the best airbnb mortgage deal on the market, as there are fewer lenders about, having someone to fight your corner and do the heavy work for you makes such a difference.

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