Introduction
We recently helped our customers arrange a holiday let remortgage in Harrogate, North Yorkshire, releasing additional equity from their existing property to fund home improvements.
The main challenge was securing an interest-only holiday let mortgage that could take account of seasonal rental income, while also addressing questions about existing credit commitments and the customers’ wider financial circumstances.
We arranged a £100,000 remortgage with Cambridge Building Society on a five-year fixed rate over a 30-year term, following discussions with the lender and the provision of specialist rental income evidence.
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The Scenario
Our customers were existing landlords who owned a holiday let property in Harrogate and wanted to raise additional capital against it.
The property was a mid-terraced house valued at approximately £240,000, with the customers looking to borrow £100,000. This represented a loan-to-value (LTV) of approximately 40–42%.
There were two applicants, one employed and the other self-employed. Their financial circumstances included established employed income, rental income from other properties and income from a relatively recently established self-employed business.
Although the self-employed business had more than a year’s trading history, its initial profits were relatively modest. The employed applicant’s income therefore formed an important part of their overall financial position.
The customers also had existing mortgage commitments associated with their property portfolio, alongside personal credit commitments.
They wanted to raise the additional funds through a holiday let remortgage with interest-only repayments, helping to manage their monthly outgoings.
A five-year fixed rate was preferred to provide greater certainty over their mortgage payments.
The Challenge
Unlike a conventional buy-to-let property, which normally generates rent through a longer-term tenancy, holiday lets advertised on platforms such as Airbnb are typically rented out for shorter stays.
Properties used for Airbnb and other holiday letting arrangements can generate different rental income throughout the year, with higher nightly rates during popular holiday periods and lower rates during quieter months.
This can make obtaining a holiday let mortgage more complicated, as lenders need to understand the property’s potential rental income across different seasons rather than relying on a standard monthly tenancy figure.
Assessing Seasonal Holiday Let Income
Unlike a conventional buy-to-let property, which normally generates rent through a longer-term tenancy, holiday lets can produce significantly different income throughout the year.
Rental rates during busy holiday periods may be substantially higher than those available during quieter months.
For this application, the lender required evidence of the property’s potential rental income across three periods:
- High season
- Medium season
- Low season
The figures needed to come from an appropriate holiday letting agency rather than simply relying on the customers’ own estimates.
This information was important because Cambridge Building Society needed to assess whether the projected rental income could support the proposed mortgage borrowing.
Existing Credit Commitments
Another challenge arose from the customers’ existing personal borrowing.
During the application process, the credit search identified commitments that required further clarification.
These included existing finance agreements and unsecured borrowing.
Although the customers did not have adverse credit issues, the lender needed a clear understanding of their ongoing financial obligations.
The underwriter required confirmation of the nature of these commitments and whether they would remain in place following the remortgage.
Multiple Sources of Income
The applicants’ financial circumstances also needed careful consideration.
One customer was employed, while the other had a relatively recently established self-employed business with modest initial profits.
The customers also received rental income and had other mortgage commitments.
It was therefore important to present their overall financial position accurately and satisfy the lender’s requirements alongside the holiday let rental assessment.
What We Did
We began by reviewing the customers’ financial circumstances, existing mortgage arrangements, credit reports and supporting documentation.
We then carried out whole-of-market research to identify lenders offering holiday let mortgages that could accommodate the capital-raising requirement.
A key consideration was finding a lender that could assess seasonal holiday rental projections rather than relying solely on the property’s potential income from a conventional tenancy.
Discussing the Case with the Lender
Before placing the application, we contacted the lender’s Business Development Manager and discussed the circumstances with the lender.
This allowed us to consider the specialist holiday let requirements and establish what supporting information would be needed.
Cambridge Building Society was identified as a suitable option because its assessment could consider projected holiday letting income across different seasons.
Obtaining Seasonal Rental Evidence
We arranged for a recognised holiday letting agency to provide a formal rental assessment.
The agency supplied evidence of the property’s anticipated rental rates during high, medium and low seasons.
This gave the lender supporting information from a third party about the property’s potential income throughout the year.
Providing this evidence was an important part of demonstrating how the property could support the proposed interest-only borrowing.
Addressing Underwriting Queries
During underwriting, questions arose concerning the customers’ existing credit commitments.
We worked directly with the underwriter to clarify the outstanding borrowing, the nature of the commitments and whether they would continue.
We provided the relevant financial documentation and explanations alongside the specialist rental evidence.
This helped address the lender’s outstanding questions and allowed the mortgage application to progress.
The Solution
We recommended a specialist holiday let remortgage with Cambridge Building Society.
The mortgage was structured as follows:
| Mortgage details | Agreed arrangement |
| Lender | Cambridge Building Society |
| Mortgage type | Holiday let remortgage |
| Borrowing | £100,000 |
| Loan-to-value | Approximately 40–42% |
| Repayment method | Interest-only |
| Mortgage term | 30 years |
| Fixed-rate period | Five years |
| Purpose | Capital raising for home improvements |
The interest-only structure suited the customers’ preference to keep their initial monthly mortgage outgoings lower than they would have been on a comparable repayment mortgage.
The proposed repayment strategy was the eventual sale of the property, which would provide the means to repay the mortgage capital.
The selected product also permitted mortgage fees to be added to the borrowing, helping accommodate the customers’ preference to limit upfront expenditure.
Why This Solution Worked
Cambridge Building Society was suitable because its holiday let mortgage criteria could accommodate several important aspects of the application.
The lender could assess the property’s projected holiday rental income using evidence of high, medium and low seasonal rates.
This meant the application could be considered using income projections relevant to the property’s intended use.
The customers also had sufficient equity in the property to support the £100,000 borrowing at a relatively low loan-to-value.
Importantly, we were able to address the underwriter’s questions about their existing financial commitments while providing the specialist rental information required.
The five-year fixed rate and interest-only repayment structure also matched the customers’ stated mortgage preferences.
The Result
We successfully obtained a decision in principle and subsequent mortgage approval from Cambridge Building Society for the £100,000 holiday let remortgage.
The approved borrowing would enable our customers to release equity from their Harrogate property to fund their planned home improvements.
The application progressed following the submission of seasonal rental evidence and clarification of the customers’ existing financial commitments.
What This Case Shows
This case demonstrates how holiday let remortgages can require a different approach from standard buy-to-let lending, particularly where additional borrowing is needed.
For landlords using Airbnb or similar short-term letting platforms, obtaining a mortgage or remortgaging may involve different lending criteria from a standard buy-to-let mortgage. Some lenders can consider seasonal rental projections, supported by evidence from a recognised holiday letting agency, rather than assessing the property solely on the rent achievable through a conventional long-term tenancy.
Seasonal rental income can be an important factor in the assessment, and lenders may require evidence from a specialist holiday letting agency rather than relying on conventional tenancy valuations.
It also shows why a customer’s wider financial circumstances matter, even when they have substantial equity in their property.
Existing credit commitments, multiple income sources and other mortgage borrowing can all require additional consideration.
In this case, early discussions with the lender, suitable rental evidence and direct communication with the underwriter helped secure approval for the required borrowing.
Need Help with a Holiday Let Remortgage?
If you own a holiday let, including a property advertised through Airbnb or another short-term letting platform, and are considering remortgaging to release equity, Kerr & Watson can help you review your mortgage options.
As independent, whole-of-market mortgage brokers, we can assess your circumstances, compare suitable lenders and explain how different providers may assess your holiday rental income.
Contact Kerr & Watson to discuss your requirements.
