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Author: Carl Shave-Director
Updated on June 3rd, 2024

What is a Holiday Let Mortgage?

Holiday Lets allow you to buy a property with the intention of letting it out as holiday or seasonal accommodation.

There is no great difference in the way this type of mortgage works compared to any other Buy-to-Let mortgage. They can be set up for capital-plus-interest payments or interest-only.

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How do Holiday Let mortgages work?

There are only slight differences between Holiday Let mortgages and any other kind of Buy-to-Let mortgage. As these loans are for properties that will be used for holiday rentals or seasonal use, borrowing is assessed differently.

For a standard Buy-to-Let, lenders will consider annual, monthly, or weekly anticipated rental income. Whereas with a Holiday Let, they will take an average across the expected spread of high, mid, and low-season rates. They may also expect you to have a minimum personal income, apart from the rental revenue, for extra security.

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Fill out our quick and easy Buy to Let mortgage calculator below. We only require a few details to see how much you may be able to borrow.



What Holiday Let mortgage criteria do I need to meet?

It’s worth remembering that while Holiday Lets will generate exceptional rents during popular seasons, there will be times when they are less competitive. This will be down to less popular seasons when the property sits vacant.

Due to the complexity of the market, lenders have more specific criteria. As ever, lending criteria will vary from one lender to another. However, there are few that will apply across the board:

  • Applicants must already own their own home.
  • Minimum age limit of 21.
  • Minimum personal income (other than that from this potential holiday let) of £20,000 PA.
  • Maximum loan value calculated using average rental income across high, mid, and low-season rates.
  • Minimum deposit of 25%.

Can I get an interest-only mortgage for a Holiday Let?

Fortunately, the answer is yes. A Holiday Let mortgage can be arranged in the same way as a standard Buy-to-Let mortgage. Therefore, interest-only or capital-plus interest payments can be arranged, or even a mix of the two.

Property investors in this sector will seek to keep their mortgage payments as low as possible. This is because rental yields on holiday lets are less predictable than those of standard Buy-to-Lets, with a risk of frequent periods where a property is vacant.

Hence, we are often asked: “Can I get an interest-only mortgage for a Holiday Let?”

You must bear in mind that if your mortgage is on an interest-only basis, you will need to have a repayment plan for the loan.

Can I get a Holiday Let mortgage with bad credit?

Yes, it’s possible to get a Holiday Let mortgage with bad credit.

When applying for a mortgage, a bad credit history will have an impact on your application. This may result in it getting refused or being offered a less-attractive product.

When considering a Holiday Let mortgage, the chances of this happening are even greater due to the limited number of lenders. Making it difficult to find a suitable lender to meet your needs.

The type of bad credit event and the length of time since it occurred will have a lot of bearing, as will your more recent credit history and your current financial status. If you can show you have recovered, you will be on much firmer footing. We strongly recommend speaking to a specialist mortgage advisor with knowledge of the markets.

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Getting the best Holiday Let mortgage rates

Being a niche market, the choice of lenders offering this type of product is reduced, but this does not mean that you will see uncompetitive rates. The interest rates on Holiday Lets will be the same as those for any other kind of Buy-to-Let mortgage. The rate you’re offered will be down to a few factors, such as:

  • The size of deposit or amount of equity.
  • Your credit history.
  • The property type.
  • Anticipated rental income.


How much deposit do I need for a Holiday Let?

You can expect lenders to require a deposit of around 25%. There may be some who will be willing to accept as low as 15%, giving you a loan-to-value rate of 85%. This is essentially the same amount that is required for a standard Buy-to-Let.

If you are simply buying a property to use as your own holiday home, then it will be viewed as a second residence. Therefore, deposit expectation will be in line with that of a standard residential mortgage – around 10%.

How much can I borrow with a Holiday Let mortgage?

Being aware of how much you could borrow is a crucial factor in determining whether the investment will be a viable proposition. Lenders typically assess using an average or spread of the potential rental income. They will take this from the high, low, and mid-season rates.

The lender will then apply a stress rate to this figure. This is usually assuming an average rental level of 125% of the mortgage payments, to allow for costs. They usually assume the property will be occupied 30 weeks through the year. For example:

Rental rates:

  • High-season – £700
  • Mid-season – £500
  • Low-season – £300

Average rate = £500 x 30 weeks = annual rental figure of £15,000

They would then work backwards from this figure to find the level of affordable mortgage payments per year.

The maximum loan using a 5-year or longer fixed-rate deal of 5% would give a maximum mortgage of £206,896. This is subject to any maximum loan-to-value criteria.

Are Holiday Let mortgages more expensive?

It’s true that with fewer lenders offering these mortgages, there is less competition in this sector of the market. However, this has not yet resulted in higher rates and uncompetitive terms. Therefore, you should not expect a Holiday Let mortgage to be any more expensive.

This said, you will still need to meet the lender’s individual criteria for creditworthiness and affordability. This may mean that you will be faced with a more expensive loan if you are not perceived as suitable by lenders.

Holiday Let mortgage lenders

The range of lenders offering loans in this sector is narrower than for other kinds of mortgages. However, this does not mean that you will encounter uncompetitive interest rates.

There are some well-known lenders who will offer mortgages to landlords, as well as smaller building societies and specialist lenders.

The differences will lie in the criteria that each lender will use when considering your application. Mainstream lenders are notoriously more stringent than their flexible specialist counterparts. So, we recommend you do some thorough research into the market before deciding. Speak to a specialist mortgage broker who can guide you through the process.

Holiday Let mortgage advice

Talking to a specialist Holiday Let mortgage broker will be the easiest way to find the right mortgage to suit you. Certain lenders aren’t available to the public, therefore using a specialist broker is the only way to access them.

At The Mortgage Centres, we offer free initial consultations and no-obligation quotes. This way you can see your holiday mortgage options and make informed decisions about your Holiday Let business. Get in touch with us today.

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