Airbnb & Holiday Let Mortgages: What You Need to Know
If you are thinking about turning a property into a short-term rental such as an Airbnb or holiday let, you’ll need the right type of mortgage.
A serviced accommodation mortgage is designed specifically for properties rented to guests rather than long-term tenants. This makes it different from a standard buy-to-let mortgage and often more complex to arrange.
Serviced accommodation can be a fantastic investment opportunity, especially as demand for flexible, short-term stays continues to grow. From holidaymakers booking weekend getaways to contractors needing a base for several months, this type of property can generate excellent returns when managed well.
However, to make the most of this investment, you need the right financial foundation in place.
What is Serviced Accommodation
Serviced accommodation is a property that is fully furnished and rented out to guests for short-term stays. These lets can range from a few nights to a few months, and they often include amenities like fresh linen, cleaning services between stays, and Wi-Fi.
In many ways, it operates like a small hotel or guesthouse, but on a more flexible basis.
The term covers a wide range of property types, including:
- Flats or houses listed on platforms like Airbnb or Booking.com
- Holiday cottages or coastal retreats
- City apartments aimed at business travellers
- Properties rented to contractors working away from home
This type of accommodation has grown in popularity thanks to the rise of the staycation market and travellers seeking unique, home-like spaces. As a result, more landlords are exploring serviced accommodation as a way to diversify their portfolios and boost income, wishing for a higher yield than offered by a standard buy to let.
Why You Need a Specific Mortgage for Serviced Accommodation
A serviced accommodation mortgage is different to a standard buy-to-let mortgage. The key difference lies in who you rent the property to. With a traditional buy-to-let, you rent to tenants on fixed-term agreements, usually for six months or longer. With serviced accommodation, you are renting to guests on a short-term basis.
Because of this, many high street lenders won’t accept serviced accommodation under a standard buy-to-let product. Specialist lenders are often needed because the income from short-term lets can be less predictable and varies throughout the year.
A serviced accommodation mortgage is designed to reflect these fluctuations and to meet the specific needs of investors in this market.
Find out Your Options
Deposit and Loan-to-Value Requirements
Most lenders will require a minimum deposit of 25% of the property’s value or purchase price, whichever is lower. Some lenders may ask for more, especially if the property is seen as higher risk or located in an area with seasonal demand.
The maximum loan-to-value (LTV) for these mortgages is usually around 75%. Offering a larger deposit can help you access more competitive interest rates and reduce monthly repayments.
This varies depending on the lender so get in touch for bespoke terms.
How Much You Can Borrow
The amount you can borrow will depend on several factors. Lenders will assess:
- The property’s location and brick and mortar value
- Expected rental income
- Your personal financial situation and tax bracket
Some lenders will also consider whether you can cover mortgage payments during quieter periods or unexpected voids. As a result, having a clear plan for marketing, pricing, and managing your property is important.
Eligibility and Affordability Checks
When applying for a serviced accommodation mortgage, you’ll need to provide information about how you plan to run the property. Lenders often ask for details such as:
- Expected nightly or weekly rental fees
- Marketing plans, including platforms you’ll use to attract guests
- How cleaning and maintenance will be managed
- Evidence of previous experience in the sector, if applicable
Your personal income and credit history will also be assessed. If you are new to serviced accommodation, lenders may be more cautious and require additional reassurance that the mortgage can be supported even during periods of low occupancy.
The Benefits of Serviced Accommodation
Serviced accommodation has several potential advantages over traditional buy-to-let properties:
- Higher income potential: Short-term lets can generate higher rental yields compared to standard tenancies, especially in popular tourist or city locations.
- Flexibility: You have more control over pricing, allowing you to adjust nightly rates based on demand and peak seasons.
- Tax advantages: There may be tax benefits available, such as capital allowances and deductions on certain expenses. Speaking to a tax specialist can help you fully understand your position.
- Portfolio diversification: Adding serviced accommodation to your portfolio can spread risk and provide an additional source of income.
When managed professionally, serviced accommodation can even become a relatively passive income stream, especially if you use a management company to handle day-to-day tasks.
The Risks to Consider
While the potential rewards are high, there are risks to be aware of:
- Income variability: Unlike long-term tenancies, bookings can fluctuate, and there may be periods with little or no income.
- Higher maintenance costs: Short-term guests can cause more wear and tear, leading to increased cleaning and repair expenses.
- Market competition: With platforms like Airbnb becoming more popular, competition can be intense in some areas.
- Mortgage risk: If you are unable to generate enough rental income to cover mortgage repayments, the property could be at risk of repossession.
Careful planning and professional advice are key to managing these risks and ensuring your investment remains sustainable.
Purchasing Through a Limited Company or SPV
Some investors choose to purchase serviced accommodation properties through a limited company or Special Purpose Vehicle (SPV). This can be a tax-efficient strategy, but it is not suitable for everyone.
Not all lenders accept applications through SPVs, so it is essential to work with a mortgage broker who understands the market. At Kerr & Watson, we can assess whether this structure is right for you and connect you with lenders who support it.
Can You Stay in Your Own Serviced Accommodation Property
Some lenders will allow you to stay in your property, for example, up to 30 days of the year, while others may have restrictions in place. It is important to be upfront about your intentions from the beginning so we can find a mortgage that suits your needs and avoids complications later on.
Why Choose Kerr & Watson
Serviced accommodation mortgages require specialist knowledge. Many high street lenders simply don’t offer these products, which is why working with a broker is so valuable.
At Kerr & Watson, we have access to a wide network of specialist lenders in the serviced accommodation market. We take the time to understand your individual situation, offering tailored advice and support.
Conclusion
Serviced accommodation can be a profitable investment, but it requires the right setup to succeed. A serviced accommodation mortgage is designed to support short-term lets and provide flexibility for fluctuating income.
With the right guidance, you can secure a mortgage that not only meets lender criteria but also supports your long-term goals.
Contact Kerr & Watson today to discuss your plans.
