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Holiday Let Mortgages: What You Need to Know
How holiday let mortgages work: deposits, how lenders assess rental income, personal use, qualifying properties, tax rules and the costs to budget for.
Published
The below article has information contained within that was correct at the time of publication but is subject to change. This is for information purposes only and does not constitute advice.
Holiday Let Mortgages: What You Need to Know
Written by Doug Miller, Director at Lansdown Financial Services.
Doug Miller is a mortgage broker and co-founder of Lansdown Financial Services, based in Bath, quoted in 30+ news articles including the Guardian, Sky News, This is Money and the Sun.
Buying a property in a popular holiday destination and renting it to paying guests can be an attractive investment. However, financing a holiday let works differently from arranging a mortgage for your own home or a conventional buy-to-let property.
Holiday let mortgage lenders consider factors such as seasonal rental income, property type, personal income and whether you intend to use the property yourself.
Understanding these requirements before purchasing can help you avoid unexpected complications and establish whether your proposed investment is financially viable.
Key Points: The Short Version
Don’t have time to read the full article? Here are the six key things you need to know.
- You’ll normally need a specialist mortgage: Holiday let mortgages are designed for properties rented to guests for short stays, rather than conventional long-term tenancies.
- Deposits often start around 25%: Many lenders offer mortgages up to approximately 75% loan-to-value, although requirements vary.
- Rental income is important: Lenders typically assess the property’s potential holiday letting income, often accounting for seasonal variations.
- Personal use may be permitted: Some lenders allow owners to stay at the property, subject to restrictions.
- Understand the tax implications: The special Furnished Holiday Lettings tax regime was abolished in April 2025, changing how holiday rental income and mortgage interest are treated.
- Consider more than the mortgage payment: Cleaning, maintenance, insurance, management fees, tax and periods without bookings can significantly affect profitability.
The bottom line: A holiday let mortgage can provide a way to finance a holiday rental property, but lender criteria and rental income assessments vary considerably. Understanding the full costs and restrictions is essential before committing to a purchase.
The Full Guide: How Holiday Let Mortgages Work
Want to understand the detail? Below, we explain holiday let mortgage deposits, borrowing requirements, rental income assessments, tax considerations and what to look out for when buying or remortgaging a holiday rental property.
In This Guide
- What a holiday let mortgage is
- Holiday let mortgage deposit requirements
- How lenders assess rental income
- Personal use and property eligibility
- Planning, safety and legal requirements
- Holiday let tax rules
- Costs and potential risks
- Frequently asked questions
What Is a Holiday Let Mortgage?
A holiday let mortgage is designed for a property that will primarily be rented to paying guests for short periods, such as weekends or holidays.
Unlike a conventional buy-to-let property, which is usually rented to tenants on longer-term arrangements, holiday lets can accommodate numerous different guests throughout the year.
This creates a different lending risk, particularly because rental income may fluctuate significantly between peak holiday periods and quieter months.
Not all mortgage lenders offer holiday let mortgages, and those that do can have substantially different eligibility criteria.
Holiday Let vs Buy-to-Let vs Residential Mortgages
| Mortgage type | Intended property use |
|---|---|
| Residential mortgage | A property primarily occupied as your own home. |
| Buy-to-let mortgage | A property generally rented to tenants under longer-term arrangements. |
| Holiday let mortgage | A property rented to paying holiday guests for short stays. |
It’s important to choose a mortgage that permits your intended use.
A standard residential or buy-to-let mortgage won’t necessarily allow holiday letting. If you’re considering changing how an existing property is used, you should speak to your lender or mortgage adviser before accepting bookings.
How Much Deposit Do You Need for a Holiday Let Mortgage?
Holiday let mortgages generally require a larger deposit than standard residential mortgages.
A deposit of around 25% is a useful starting point, as many holiday let mortgage products are available at approximately 75% loan-to-value (LTV).
However, some lenders require a larger deposit, while others may offer different maximum LTVs depending on the property and your circumstances.
For example:
| Property purchase price | 25% deposit | Mortgage required |
|---|---|---|
| £200,000 | £50,000 | £150,000 |
| £300,000 | £75,000 | £225,000 |
| £400,000 | £100,000 | £300,000 |
| £500,000 | £125,000 | £375,000 |
Figures are illustrative and assume a mortgage at 75% loan-to-value. They exclude purchase taxes, legal fees and other associated costs.
Having a larger deposit may give you access to a wider choice of lenders or more competitive mortgage products.
However, deposit size is only part of the assessment. The property’s expected rental income must also support the borrowing under the lender’s criteria.
How Much Can You Borrow on a Holiday Let Mortgage?
The amount you can borrow depends on several factors, particularly the property’s expected holiday rental income.
Unlike a residential mortgage, where lenders focus heavily on your personal income and expenditure, holiday let lenders typically place significant importance on the property’s ability to generate rental income.
They may also consider your personal earnings, existing mortgage commitments, other properties and overall financial circumstances.
How Do Lenders Calculate Holiday Let Rental Income?
Holiday let income can vary substantially throughout the year.
For example, a cottage in Cornwall might achieve strong weekly rental prices during July and August but receive fewer bookings during the winter months.
Lenders therefore need a realistic assessment of the property’s potential rental income rather than relying solely on peak-season prices.
Depending on the lender, this may involve:
- Estimated weekly rental income during high, mid and low seasons.
- A rental assessment from an appropriate holiday letting agent or valuer.
- Previous letting figures, where available and acceptable.
- The property’s location, suitability and expected demand.
Different lenders use different affordability calculations, meaning two lenders could offer substantially different borrowing amounts against the same property.
Do You Need a Minimum Personal Income?
Some holiday let mortgage lenders require applicants to earn a minimum personal income, while others take a different approach.
This can be particularly relevant if you’re self-employed, retired or receive income from multiple sources.
A strong projected holiday rental income doesn’t automatically mean every lender will approve the mortgage.
The important thing is identifying lenders whose criteria match both your circumstances and the proposed property.
Can You Use Your Holiday Let Property Yourself?
Potentially, yes.
One of the attractions of owning a holiday let is the possibility of spending time at the property yourself.
However, lenders have different rules regarding personal use.
Some allow owners to occupy the property for a limited period each year, while others have more restrictive conditions.
If you intend to use the property for family holidays or occasional weekends, it’s important to make this clear before applying.
The mortgage needs to permit the way you actually intend to use the property.
What Properties Qualify for a Holiday Let Mortgage?
The type of property you’re purchasing can affect which lenders are available.
A conventional house or cottage in a popular holiday destination may be acceptable to a range of specialist lenders.
However, more unusual properties can create additional complications.
These might include certain holiday lodges, properties with unusual construction, restrictive occupancy conditions or homes within holiday developments.
Leasehold properties also require additional consideration.
For example, if you’re buying a flat to operate as a holiday let, you’ll need to establish whether the lease permits short-term letting.
Before committing to a property, it’s important to confirm that it can both be mortgaged and legally operated as holiday accommodation.
Do You Need Planning Permission or a Licence for a Holiday Let?
Possibly. The requirements depend on the property’s location, use and the rules applying in that part of the UK.
In England, local planning authorities determine whether planning permission is required, taking account of the property’s use and its impact on the surrounding area.
The government is also preparing a national registration scheme for short-term lets in England, expected to begin in March 2027.
Scotland already operates a mandatory short-term let licensing scheme, while Wales and Northern Ireland have their own regulatory requirements.
If you’re considering buying a holiday let, it’s essential to check the relevant rules before committing to the purchase.
What Other Responsibilities Do Holiday Let Owners Have?
Operating a holiday let involves responsibilities beyond arranging the mortgage.
Depending on the property and its location, these may include:
- Fire safety assessments and appropriate safety measures.
- Gas and electrical safety requirements.
- Suitable buildings, contents and public liability insurance.
- Planning and local authority requirements.
- Energy Performance Certificate requirements, where applicable.
- Council tax or business rates.
- Any relevant registration or licensing requirements.
The government’s guidance on letting out self-catering holiday homes in England provides a useful starting point.
What Are the Tax Rules for Holiday Lets?
The tax position for holiday lets changed significantly in April 2025.
The former Furnished Holiday Lettings (FHL) tax regime has been abolished.
Previously, properties meeting the relevant FHL criteria could benefit from certain tax advantages that differed from conventional residential letting.
These included more favourable treatment of some mortgage finance costs, capital allowances and certain Capital Gains Tax reliefs.
Those specific benefits are no longer generally available following the abolition of the regime.
Can You Still Claim Mortgage Interest Against Holiday Let Income?
For individuals, mortgage interest and other qualifying finance costs are now generally subject to the same basic-rate Income Tax relief rules that apply to other residential landlords.
This means higher-rate taxpayers cannot necessarily deduct all their mortgage interest directly from rental income when calculating taxable profits.
Companies are treated differently for finance-cost purposes.
The exact position will depend on the ownership structure and individual circumstances.
We recommend speaking to an accountant or qualified tax adviser before purchasing a holiday let, particularly if you’re considering whether to own it personally or through a limited company.
Should You Buy a Holiday Let Personally or Through a Limited Company?
Both ownership structures may be possible, subject to lender criteria.
However, the tax implications, borrowing options and administrative requirements can differ.
Purchasing personally may be appropriate for some investors, while a limited company structure may suit others.
Changing ownership later can involve mortgage, tax and legal costs, so this is a decision worth considering before you buy.
Lansdown Financial Services can advise on the mortgage options available for your chosen ownership structure, while your accountant or tax adviser can help assess the tax implications.
What Costs Should You Consider When Buying a Holiday Let?
The mortgage payment is only one part of the overall cost.
A property generating strong booking revenue doesn’t necessarily produce strong profits.
Before purchasing, it’s important to understand both the initial costs and ongoing expenditure.
| Cost | What to consider |
|---|---|
| Mortgage repayments | Monthly borrowing costs and potential interest rate changes. |
| Property purchase costs | Deposit, legal fees, property taxes, surveys and valuation costs. |
| Cleaning and maintenance | Guest changeovers, repairs and ongoing upkeep. |
| Utilities and insurance | Energy, water, broadband and specialist holiday let insurance. |
| Booking and management fees | Charges from booking platforms, letting agents or property managers. |
| Empty periods | Weeks or months when the property generates little or no income. |
| Tax and other charges | Income tax or Corporation Tax, council tax or business rates, and service charges where applicable. |
It’s particularly important to assess the property’s potential net income rather than concentrating on gross booking revenue.
What Happens If You Don’t Get Enough Bookings?
Holiday let income can be seasonal and unpredictable.
A property may be fully booked during the summer but experience much quieter periods during the winter.
Your mortgage payments and other financial commitments continue even when the property is empty.
Before purchasing, consider whether you could still afford the mortgage if bookings were lower than expected.
Keeping an appropriate financial reserve for repairs, unexpected costs and quiet periods can help reduce the risk.
Are Holiday Let Mortgages Interest-Only?
Many holiday let mortgage lenders offer interest-only products, although capital repayment mortgages may also be available.
With an interest-only mortgage, your monthly payments normally cover the interest charged without reducing the amount originally borrowed.
For example, if you borrow £200,000 on an interest-only basis, you could still owe £200,000 when the mortgage term ends.
You’ll therefore need a credible plan for repaying the mortgage capital.
For some investors, that may involve eventually selling the property, subject to lender approval of the repayment strategy.
Interest-only borrowing may help with monthly cash flow, but lower monthly payments don’t necessarily mean a lower overall borrowing cost.
Can You Remortgage an Existing Holiday Let?
Yes, potentially.
If you already own a holiday let and your mortgage deal is approaching its end, you may be able to remortgage with your existing lender or another specialist provider.
Lenders will consider factors including the property’s current value, outstanding mortgage balance, rental performance and your circumstances.
You may also be able to release equity from the property, subject to affordability, loan-to-value limits and the purpose of the additional borrowing.
As with other mortgages, it’s worth reviewing your options before your current deal expires.
Are Holiday Let Mortgages a Good Investment?
A holiday let can be a worthwhile investment, but this depends on the property, its location, running costs and realistic rental performance.
A lender agreeing to provide a mortgage doesn’t mean the property is automatically a good investment.
Before purchasing, we’d suggest considering:
- How much rental income the property could realistically generate across a full year.
- Whether local demand is seasonal.
- The proportion of income likely to be absorbed by management and running costs.
- The impact of tax and mortgage interest.
- Whether you could afford the property during quieter periods.
- Your longer-term plans and potential exit strategy.
A holiday property might be appealing because you’d enjoy spending time there yourself, but the financial decision should still make sense.
Our view: Don’t base a substantial property investment on optimistic holiday rental estimates. Understand the costs, assess realistic income and make sure the mortgage is suitable for your circumstances.
Frequently Asked Questions About Holiday Let Mortgages
Can You Use a Normal Buy-to-Let Mortgage for a Holiday Let?
Not necessarily. Many conventional buy-to-let mortgages are designed for longer-term tenancies and don’t permit repeated short-term holiday bookings.
You should confirm that the lender explicitly allows holiday letting before purchasing or changing how a property is used.
Can You Get a Holiday Let Mortgage Without Owning Your Own Home?
Potentially, although lender criteria vary.
Some specialist lenders require applicants to already own a residential property, while others may consider different circumstances.
Your personal income, deposit and the property’s expected rental income will also be relevant.
Are Holiday Let Mortgages More Expensive Than Residential Mortgages?
They can be. Holiday let lending is more specialised, and the rates and fees available may differ from those offered for residential mortgages.
It’s important to compare total borrowing costs and ensure the product permits your intended use.
Can You Get a Holiday Let Mortgage Through a Limited Company?
Yes, some lenders offer holiday let mortgages to suitable limited companies.
However, the choice of lenders and eligibility requirements may differ from purchasing personally.
Professional tax advice is recommended before deciding on an ownership structure.
How Lansdown Financial Services Can Help
Holiday let mortgages are a specialist part of the mortgage market, with lenders taking different approaches to rental income, property types, personal income and intended use.
At Lansdown Financial Services, we take the time to understand your circumstances and how you intend to use the property before identifying suitable mortgage options.
Whether you’re buying your first holiday let, expanding an existing property portfolio or remortgaging, our award-winning mortgage advisers can help you understand the lending criteria and borrowing costs involved.
As a free, whole-of-market mortgage adviser with access to more than 70 lenders, we provide straightforward, personalised advice without the jargon.
Considering purchasing a holiday let, or looking to remortgage an existing holiday rental property?
Contact Lansdown Financial Services or call 01225 459515 to speak to one of our award-winning mortgage advisers for free, expert mortgage advice.
Your property may be repossessed if you do not keep up repayments on your mortgage.
Not all buy-to-let mortgages are regulated by the Financial Conduct Authority. Tax treatment depends on individual circumstances and may be subject to change.
About the Author
Written by Doug Miller, Director at Lansdown Financial Services.
Doug Miller is a mortgage broker and co-founder of Lansdown Financial Services, based in Bath, quoted in 30+ news articles including the Guardian, Sky News, This is Money and the Sun.
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