Securing a mortgage on a property that will be let out via Airbnb is not always straightforward as lenders perceive this as a different risk than the traditional Buy to Let model. Even with the perceived risk, there are now a number of lenders that are willing to look at lending on this basis.
In recent years Airbnb has become very popular. An increasing level of people are using the service to source properties that are available for holidays, short breaks and short-term accommodation for varying purposes.
With this increase in popularity it is no surprise that the number of landlords that are offering this service are also increasing. While the turnover of ‘tenants’ is naturally higher than the traditional Buy to Let model, the increase in rental revenue can make it very worthwhile.
Can I get a mortgage for an Airbnb property?
The good news is yes, just as for a Holiday Let property, it is entirely possible to get a mortgage for an Airbnb property in the UK. However, the term ‘Airbnb’ (the trademarked name of the company facilitating short-term stay rentals) can cover a range of properties from traditional Holiday Lets to sections of a house, or sometimes just a single room, so the kind of mortgage you think you need may differ (or may not be suitable) according to the type of premises you are letting out.
And also, while the question above may seem like a simple one, in reality the answer isn’t simple at all. As with any type of mortgage, different lenders have different criteria that need to be considered, with some taking a tighter line with regard to deposits, proof of income, credit status, amount of time the property can be let out, etc, than others, meaning that some lenders (and their deals) may not be an option for you, depending on your exact circumstances.
So, before approaching a lender for an Airbnb mortgage, there are a number of factors that need consideration. Chief among them will be your investment strategy. As an Airbnb ‘host’, will you be letting out the whole property (the flat, house, cottage, etc.), or just part of it (like a studio room, or the downstairs rooms, for example) while still living in another section? This will make a big difference to how a lender will approach your mortgage.
It is also important to understand how many days in a calendar year the property will be available for letting, as this will affect its status as a Holiday Let (and therefore a business, where you can claim tax relief on the mortgage interest) or as a residential home. Speak to one of our advisers today to see how they may be able to help you find the most suitable mortgage for your Airbnb property.
Do you need a buy to let mortgage on an Airbnb property?
It is not always necessary to get a Buy to Let mortgage on an Airbnb property. The type of mortgage you need will mostly depend on your Airbnb letting strategy.
For example, if you are looking to only rent a room out in a property that you live in, and this is for a limited number of weeks or months in a calendar year, then you may find that your current residential mortgage lender may already allow this. In these situations it is important to notify your current lender of your intention to let a room in your property prior to doing so. Otherwise you may find yourself in breach of your mortgage contract.
However, if you are looking to purchase a property or use an existing property solely for letting out then you will need to get a Buy to Let mortgage. Buy to Let mortgage lenders will also restrict the period of time per calendar year that you can let your property via Airbnb. While some lenders will allow type of letting for 3 months in a calendar year, there are others that will allow this type of letting for up to 6 months per calendar year.
Whatever your strategy, it is important to get the correct advice so you do not breach any of your mortgage contract terms and you can plan ahead by getting the correct type of mortgage.
Can I use a holiday let mortgage for an Airbnb property?
Given the transitory nature of Airbnb tenants, and how Holiday Let properties are also let out on a short-term basis, a Holiday Let mortgage is usually considered by lenders to be the most appropriate type of mortgage to use to acquire an Airbnb property, rather than a Buy-to-Let mortgage. In fact, as the Airbnb platform has become so popular, with everything being online making the whole process of booking, paying and communication very easy and direct, many lenders now launch Holiday Let-style mortgages with Airbnb specifically in mind.
As with Holiday Lets, if you are planning to let out the whole property, then to qualify for this type of mortgage you cannot use the property as your place of residence. The terms of the mortgage are designed to reflect the nature of the property as the focus of a business, as well as the level of risk involved, meaning you have to be clear about your use of the property. Lenders will look very poorly upon any breach of the terms.
If you are planning to still live in the property and only rent out a single room or certain section, then you may not need a Holiday Let mortgage. This could be classed in a similar way to taking in a lodger, and could be permissible under the terms of a residential mortgage. Similarly, if the property is not to be let out for longer than a certain amount of days per year, then you may not fall within the definition of a Holiday Let, and a special mortgage might not be necessary.
As you can see, a lot depends on the type of property, how much of it is being let out, and for what length of time over the year, so you should really seek advice from an experienced mortgage broker before approaching any providers about a mortgage. You’ll want to make sure you’re applying for exactly the right type of loan to fit with your ambitions for the property and your needs as an Airbnb host.
Airbnb mortgage eligibility
The criteria for an Airbnb mortgage will vary from one lender to another, with some taking more stringent lines on certain factors than others. It may depend on whether you are dealing with one of the mainstream lenders – who tend to cater to the only most straightforward clients with no complications – or one of the smaller providers or specialist lenders who are filling the gaps in the market, but there are a few commonalities.
If you are going for a Holiday Let type of mortgage, then lenders will want to check your anticipated rental income for the whole of a calendar year in order to allow for seasonal fluctuations between popular months (when rents will be much higher and more lucrative) and quieter times (when you may struggle to have any income at all). The evidence for this will obviously depend on the location of the property and any track record of established short-stay rental patterns in the area. If you are applying for a Buy-to-Let style loan, then lenders will assess your ability to service your new mortgage based on the income your property could achieve on a standard rental, which may be less.
Lenders will also look at the type and size of the property. Conventional houses, apartments, cottages, etc, will not cause any problem, but any property that may be more difficult to sell in future or pose a particular risk of damage, such as a listed property or non-standard construction properties (like static caravans), as well as properties that are below 25–30 square metres in size, are likely to be turned down.
In terms of a deposit, the expectations are usually the same as for Holiday Lets or Buy-to-Let properties. Lenders would require you to provide a deposit of at least 20%–25% of the purchase price, or in the case of a remortgage the equivalent amount of equity. As is always the case, the higher the level of deposit you can supply, the more likely your application is to be accepted and the more favourable the deal or interest rate could be. Having the security of a sizable deposit encourages lenders to be more flexible on other points.
Although the property will be the focus of your business and usually the primary source of income to fund the mortgage, lenders will also likely assess your personal income as well as your credit history and profile, to make sure that you will be able to cover the mortgage repayments over the course of the year, in case of quiet periods.
Trying to secure the right Airbnb mortgage isn’t always straightforward, and a lot will depend on the type of property, its location and the circumstances around your financing of the mortgage in the long run. Your best bet is to speak to one of our expert mortgage advisers, who will be able to help you find the right mortgage for your needs.
Airbnb property rates
While everyone is keen to ensure their mortgage is on the most favourable possible rate, it would be impossible for us to list the ‘best’ rates here. The mortgages market is highly dynamic, with rates frequently shifting, new products being introduced and other deals being removed almost on a daily basis.
It’s also the case that the most suitable mortgage interest rate available to you for an Airbnb property will largely depend on your own individual circumstances. Lenders will offer the most suitable on short-stay properties to those who have:
- Larger deposits
- Higher, consistent personal income
- A good credit history and profile
To be even more certain of obtaining the most favourable deal, your mortgage application should be further backed up with previous experience as a landlord, showing that you understand about the costs and duties involved with letting out a property, and therefore present a lesser risk than someone new to the business.
Mortgage rates for Airbnb and other Holiday Let properties are likely to be a little higher than for the average residential mortgage, but our team of specialist advisers have access to some of the most reasonable and reliable Airbnb mortgage lenders on the market. With decades of experience in sourcing just the right mortgages on all sorts of properties, for a wide variety of borrowers, they are well-placed to secure the right Airbnb mortgage rate for you.
The only way to find out the most suitable interest rate for your Airbnb property mortgage is to talk over all the details of your property and finances. Call and speak to one of our advisers today to find out more.
Airbnb mortgage lenders
With the dramatic rise in the popularity of Airbnb in recent years, an increasing number of lenders are becoming more flexible when it comes to granting a mortgage on these types of short-term lettings. There may be a perception of an increased risk with no agent involved and less personal contact between the ‘host’ and the temporary tenant. But with the increase in using digital technology to organise our lives – from shopping to parking, ordering food, keeping fit and even managing our finances – this concern is on the wane, especially as the digital arena often facilitates greater accountability (through reviews, feedback, data tracking, etc).
You might find that a few high street lenders are moving slowly towards recognising the need to understand this type of lending, with the introduction of variants on a Holiday Let-style mortgage product. However, they are not always keeping up with the times, and their more conventional perspective and lending criteria might lead them to view the property as unsuitable for lending on, or they may not be willing to consider lending where the source of income or finance for the mortgage might be unreliable or inconsistent.
You are more likely to find the mortgage you need through one of the specialist Buy-to-Let lenders, who tend to be more flexible in their approach to borrowers and new methods of property management. They’ll take a far broader view in their assessment of your finances and the circumstances around the property, understanding about seasonal fluctuations and ways of anticipating income.
These specialist lenders rarely advertise to the public and prefer to accept mortgage applications only through a trusted third party like our team at Just Mortgage Brokers. As experienced brokers with established relationships with lenders across the board, we are able to access deals that you will not find available on the high street and are confident that we can find exactly the right mortgage to meet your needs and plans for your Airbnb property.
There is no guarantee that it will be possible to arrange continuous letting of the property, nor that rental income will be sufficient to meet the cost of the mortgage.
Your property may be repossessed if you do not keep up repayments on your mortgage.
Mortgage Advice for Airbnb properties
As with any type of mortgage advice, it is important that you get the correct advice to secure the right mortgage type and rate for your individual circumstance.
Airbnb mortgages are not always straightforward and it is important to understand the type of mortgage you are taking on. Breach of mortgage contract is something that you hear about in this area of mortgage lending. If a breach of mortgage contract occurs then a mortgage lender can recall the whole loan. This can not only be stressful but quite costly.
If you want to understand your Airbnb mortgage options then get in touch with us today and we will endeavour to give you the most appropriate mortgage advice for your Airbnb property.