Midlands Lender Launches Mortgages for Airbnb Hosts
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Midlands Lender Launches Mortgages for Airbnb Hosts

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Carl Shave Carl Shave | September 24, 2018

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Recent years have seen a rise in the popularity of services like Airbnb, which allow homeowners to let out all or part of their properties to people on a short-term basis. One problem that has faced some homeowners, however, is that the terms and conditions of most standard residential mortgages do not allow for such short-term lets. Furthermore, it usually isn’t allowed on typical buy-to-let mortgages either, as lets generally have to be secured with a formal tenancy agreement.

That situation may be about to change, however, as Midlands-based lender Tipton & Coseley Building Society has just launched two new buy to let discount mortgage products designed for people who want to let their property via Airbnb and similar services.

The two-year discount mortgage offers a 2.49% interest rate, rising to the lender’s standard variable rate (SVR) – currently 4.99% – after the initial two-year term. There is no booking fee for the product, but there is an arrangement fee of £999. The overall cost for comparison (APRC) is 4.3%.

The lender’s five-year product offers an initial rate of 2.99%, rising to the SVR at the conclusion of the initial five-year term. The product has no booking or arrangement fee, and the APRC is 4.3%.

For both discount mortgages, the minimum loan amount is £50,000 and the maximum loan is £750,000, with repayment terms from five to 35 years. Qualifying properties must be valued at a minimum of £75,000, or £250,000 for properties located within the M25 corridor. The maximum loan-to-value (LTV) ratio is 75%.

This new type of mortgage for Airbnb means that homeowners can let out all or part of their properties on a short-term “holiday let” basis. This differs from a standard residential mortgage where letting out your property is usually considered a breach of the mortgage terms and conditions. Breaching your mortgage conditions could have serious consequences, from having to pay an increased interest rate to the lender calling in the loan.

Some residential lenders may allow properties to be let out providing you seek consent first, but there are usually strict conditions such as a minimum term – six months, for example – and a maximum, which might be two years. The let will typically also need to be secured by an assured tenancy agreement. Similarly, most buy-to-let mortgages have minimum let terms and a strict requirement for a tenancy agreement.

Lenders have generally been reluctant to embrace Airbnb-style lettings for two main reasons. First, it could be deemed commercial usage of the property on which a mortgage has been granted on strictly residential terms. Second, the nature of short-term or holiday letting can mean that a large number of people have access to the property over time, which could present a risk.

While most lenders are wary of Airbnb and similar lettings, others have recognised the rise in this type of letting and take a slightly more relaxed approach. Metro Bank, for example, allows customers to let their own residential homes for up to 90 days a year through Airbnb without the need to apply for approval in advance. Nationwide, meanwhile, allows borrowers to let out up to two rooms in a property on a bed-and-breakfast style basis. Market Harborough Building Society also allows Airbnb lets for up to 24 weeks in a year.

At Just Mortgage Brokers, we have access to mortgage deals for all types of borrower, including those who wish to let their property out through Airbnb. We can advise on the best option for you, depending on your circumstances, so get in touch today.

The rates quoted in this article were accurate at the time of publication.