Holiday Let Mortgage Criteria

What Are Holiday Let Mortgages?

It might seem like a fairly obvious answer, but it is definitely worth getting the basics down before we get into the real meat of holiday buy-to-let mortgage loans! A holiday let mortgage is a mortgage that allows you to rent out a property for short term periods as a holiday destination. So, for example, you could buy a small cottage in the lake district and rather than having a residential mortgage (where you would need to permanently live in the property), or a regular buy-to-let mortgage (where your property would need to be let out on a long term basis all year round), you could have a mortgage for holiday let purposes. A loan that will allow you to rent out the property when you want, for days or weeks at a time, and make profit based on seasonal peaks and off-peaks.

Holiday Let Mortgage UK Criteria

As with any other type of mortgage, holiday let properties need to meet certain criteria and different lenders have different stipulations, depending on their appetite for the business and their own risk assessments. If you are looking to get a mortgage for holiday let, UK lenders generally follow a similar criteria to regular buy-to-let loans. Most will have a minimum and maximum mortgage loan size, although because of the nature of the properties being mortgaged and the location, the maximum loan size is normally quite high at around £1,000,000 or more.

They will also generally require a larger minimum deposit than you would normally be expected to put down on a regular residential purchase. With some lenders, the minimum deposit required can also be higher than the one needed for a regular buy-to-let loan due to the specialist holiday let lending. For example, a person purchasing a residential property could potentially put down as little as 5% or 10% deposit and get a 90 – 95% LTV loan. A buy-to-let mortgage lender will generally need somewhere between 20 and 25% deposit minimum, but some holiday let mortgage criteria will say that you need 30 – 40% deposit minimum. But this is not always the case. For more mainstream high-street holiday let mortgages, 80% LTV loans could potentially be possible.

Holiday Let Mortgage Lenders

When it comes to holiday let mortgages, lenders offer a great deal of varying products and rates and holiday let mortgage providers will have their own specific criteria that you MUST match, in order to do business with them. The below list is a few lenders who offer these types of mortgages, or something similar.

Leeds Building Society Holiday Let Mortgage

Here is a breakdown of the holiday let mortgage criteria provided on Leeds holiday let mortgage page:

Leeds will assess holiday let affordability using an average of the high, mid and low expected seasonal rental income. The letting agent should confirm in writing a high, mid and low expected seasonal rate. They’ll then take an average of these seasons over a 30-week period to calculate the annual rental income.

As an example, if high season is £900, mid-season is £620 and low season is £400, they’d use the average of £640 over 30 weeks to give an annual rental figure of £19,200 and apply this to the relevant rental coverage calculation.

The calculation is £19,200 divided by 12 months = £1,600 monthly rental.

£1,600 divided by 1.50 =£1,066.67 divided by 6.00% = £17,778

£17,778 multiplied by 12 therefore gives a maximum lend of £213,333

They will use an Interest Coverage Ratio (ICR) and a stressed interest rate to calculate affordability. Your mortgage advisor will be able to check this thoroughly for you.

Summary of Holiday Let Lending Criteria

• Maximum portfolio size of 10 mortgaged rental properties, irrespective of lender.
• Maximum of 4 rental properties can be mortgaged with The Society, whether Buy-to-Let, Holiday Let, HMO, or a combination (maximum £2m value)
• Minimum income requirement: Single applicant £40,000. For joint applicants, if no individual earns £40,000, a combined minimum income of £60,000 is required.
• Property investment / holiday letting must not be the primary source of income.
• Maximum loan to value on any one property: 75% purchase or remortgage.
• Maximum individual loan: £1,000,000
• Minimum property valuation: £50,000
• Only single dwellings will be considered; no consent for multiple occupancy.
• Property must be of standard construction and free of any occupancy restrictions. For this reason, holiday parks and property with local ownership clause are excluded.

Barclays Holiday Let Mortgages

Although not actually offering long term purpose holiday let property loans, Barclays will offer short term holiday let mortgages as long as they meet the following criteria:

Essentially classed as an Airbnb type mortgage, Barclays will look at things like mortgage affordability and rental income in a similar way to regular buy-to-let applications. They won’t increase the rate when borrowers let their property out, and homeowners will not need to ask for permission before making a booking.

The property must not be occupied by someone other than the owner for longer than 90 days in any 12-calendar month period and for no longer than 30 days consecutively by any single individual other than the owner, otherwise this will be classed as a regular buy-to-let loan. 

For further information about Airbnb mortgages, speak to one our our mortgage advisors.

Principality Holiday Let Mortgage

Wales based mortgage lender Principality will offer holiday let mortgage loans on most properties, their own criteria is in detail below:

With holiday let mortgages, Principality can consider non-regulated Holiday Let applications from intermediaries on an advised basis (only through a mortgage advisor. The applicant must have no more than two mortgaged holiday lets, whether in sole or joint names (including current application).

• A minimum income of £20,000 is required for any applicant on the application up to a maximum loan size of £250,000. For loan sizes up to £250,000 if any single applicant does not earn at least £20,000 then the applicants must earn a minimum of £30,000 jointly. For loan sizes between £250,001 and £1,000,000 the minimum income rises to £40,000 either solely or jointly.
• All income will be verified. Income is assessed and calculated as per principality’s standard residential lending policy.
• In addition to our usual packaging requirements we also request a letter from a local holiday letting agency confirming the high, mid and low season rates. We will then take an average of these seasons over a 30 week period to calculate the annual rental income.
• For example, if high season = £700, mid-season = £500 and low season = £300 they would use the average of £500 over 30 weeks to give an annual rental figure of £15,000 to be applied to the relevant rental coverage calculation above. The calculation is £15,000 / 12 months = £1,250 monthly rental. £1,250 / 1.45 = £862.07 / 0.0665 = £12,963.46. £12,963.46 x 12 gives a maximum lend of £155,561.
• They will allow a maximum LTV of 60% up to a value of £1,000,000 and 75% up to a value of £750,000.

Teachers Building Society Holiday Let

Teachers Building Society, offering preferential mortgages and products to people in a teaching or education based profession, will also offer holiday let loans. Their criteria is as follows:

• Lending up to £1 million at 75% LTV
• Variable and fixed rate product options
• Minimum income of £25,000 or for joint applications a combined income of £40k
• Maximum age at end of term 83
• Use of your property for up to 2 months per 12 month period
• Lending is calculated on projected average rental income. For remortgages, we use 100% of rental received
• Free valuation up to £800k
• Arrangement fee: £0
• No application fee on our variable rate product
• Property can be marketed for rent through Airbnb type platforms

Nationwide Holiday Let Mortgage

Unfortunately Nationwide do not offer holiday let mortgages. Nationwide’s buy-to-let arm The Mortgage Works will offer buy-to-let loans that can be taken over short period tenancies, but not specifically holiday let lending.

Skipton Building Society Holiday Let Mortgages

Again, unfortunately Skipton will not offer holiday let loans. But, they do offer buy-to-let loans and like Nationwide, these can potentially be for short period lets. Speak to your mortgage advisor if you want to explore this option.

Holiday Let Mortgage Rates

Mortgage rates change all the time, there is no question about that. And the same goes for holiday let products too. So, the best thing to do if you are looking for the best holiday let mortgage rates is to speak directly with a holiday let mortgage broker like Oportfolio. Oportfolio has access to every lender who offer holiday let loans and can help advise you on what you need to do, where you need to go, and what rates and rental yield you could achieve. Getting the best holiday let mortgages doesn’t just mean the lowest rate, it means positioning your financial investment in the best place to make you money and make sure that you are in the best possible place financially.

As of writing this blog, the best available rates on the market are as follows. Please remember that these rates will likely have changed and may no longer be available:

• 75% LTV Holiday Let Fixed Rate Mortgage: 5.70% rate – fixed for 2 years – No product fee
• 75% LTV Holiday Let Fixed Rate Mortgage: 5.60% rate – fixed for 5 years – No product fee
• 60% LTV Holiday Let Fixed Rate Mortgage: 5.80% rate – fixed for 5 years – £999 fee
• 75% LTV Holiday Let Fixed Rate Mortgage: 6.00% rate – fixed for 5 years – £999 fee

Buy-To-Let Holiday Mortgage Popularity

Are holiday lets still popular choices in 2023? Recent research suggests that buy-to-let holiday home mortgage searches and purchases have actually increased significantly since 2020 as people looked to escape from the confines of urban lockdown.

New data released by financial information site Moneyfacts.co.uk suggests that the demand for and introduction of holiday let mortgages on the market has increased dramatically since 2020.

The data they have produced shows that, at the end of 2020, there were available on the market however, this had risen to a staggering 186 by September 2021 and even further to 231 holiday let mortgages available today. Moneyfacts also notes that the number of lenders in the holiday let market has gone up from 14 at the end of 2020 to 27 today clearly showing that lenders are noticing a profitable gap in the market and an increasing demand from customers.

Many financial analysts and mortgage brokers put this dramatic increase down to the effects of the lockdowns of 2020 and 2021. After months of being forced into isolation and unable to travel abroad for holidays, people started to turn to staycations in the UK and bookings for seaside resorts and cosy countryside cottages went through the roof. Many people have seen this uptake in British holiday destinations as a potentially lucrative business to make a bit of money after a particularly hard couple of years so holiday let mortgage enquires have subsequently increased.

Is A Buy-To-Let Mortgage For Holiday Let Purposes Right For Me?

If you are looking for a good way to invest your money, and like the idea of owning a place where people can go and have fun in the sun, then this might be just what you are looking for. As long as you find the right property and have the help of the right mortgage advisor. Holiday lets can be a great money maker and a great alternative to a traditional long term buy-to-let property. If you have the right location i.e. a popular seaside town or a quirky countryside cottage, you can charge a a lot of money for the pleasure of staying in your property.

Some homes in Sandbanks in Dorset, can charge as much as £4,000 a week for a standard holiday cottage. Although these are at the top end of the rental income you can receive, even lower figures for short term holiday rentals can be much more lucrative than letting out a normal residential property on a monthly basis.

Speak To Expert Holiday Let Mortgage Brokers Today

If you are considering purchasing a place in the sun to let out as a holiday let property, speak to the experts in holiday let mortgages criteria today. At Oportfolio mortgages, we can offer you help and guidance every step along the way to help you get the best buy-to-let mortgage holiday home for your needs. An initial mortgage consultation with one of our experts is free of charge. Call our team today to get things started today.