Holiday Let Mortgages

Before renting your property on Airbnb, there is various legislation and rules in the United Kingdom which will determine whether or not you are able to rent your house for short-term lease on Airbnb and similar through similar businesses.

Leasehold Properties

Check your lease agreement carefully if you own or are looking to buy a leasehold property. Some homes are for “private residence only”, in which case you’ll be disallowed from renting out your property short term.

Regulations by Region

Some cities and regions have restrictions on short-term rentals. Be sure to research the destination to see if there are any additional rules and regulations.

Visit the Airbnb website to learn about local regulations and other important factors to consider before becoming an Airbnb host.

LDN Finance will assign you with an expert mortgage adviser who will guide you through the entire process in securing a holiday let mortgage. While we can make suggestions with regard to your ideas for renting out your property on a short-term basis, the rental process would be your responsibility.

There are very different considerations to keep in mind when buying a holiday let property, compared to buying your own home, and we’d strongly recommend thinking about the following before you commit to a property:

Research the Market

Identify market opportunities with the help of estate and lettings agents. They’ll be able to advise on many specific areas within the cities and villages you’re considering. If you’re planning to personally run and maintain your holiday let, you should also consider the travel distance from your home.

Understand your own financial situation

Keep in mind whether you’re buying the house for capital gain on sale, or consistent monthly rental income. The type of mortgage required will change depending on these circumstances, and then you’ll need to consider your price point.

Charging too little will result in a fully-booked property that doesn’t cover the expenses of your mortgage, while going too high will result in a property that’s empty during holiday season.

Let our expert advisers guide you through the process.

While you may want to discuss with an expert beforehand, LDN Finance will assign you with a personal mortgage adviser who can guide you through every aspect of your entire mortgage and property-buying process, ensuring that the circumstances meet and the property is right for your requirements.

Ensure you’re buying a property with sufficient profit margin.

Cheap properties requiring significant renovation can potentially be lucrative, but require a lot of initial work. If you’re going along this route, make sure that you have the time and money to complete the project. It may be worth initially investing more in a complete and fully functional property solely to get on market earlier and generate income quicker.

Ensure you’re aware of new and updated safety regulations.

By law, you’re responsible for the property complying with various safety regulations, such as the fire safety of furniture and furnishing, gas safety, electrical equipment safety, installation of a smoke detector, and so forth.

You’ll also need certificates to prove these regulations have been met. Failure to comply with the law can result in serious consequences.

Tax implications

A Holiday Let investment attracts several different taxes. Aside from Stamp Duty Land Tax, which you have to pay when you purchase any Holiday Let property, you may also have to pay Income Tax on the rent you receive and Capital Gains Tax when you sell the property. Rental income must be declared on a Self Assessment tax return. However, you can deduct costs such as mortgage interest and letting agency fees from the rent you receive first. And like anything else you own, a Holiday Let property will form part of your estate for Inheritance Tax purposes. There may also be tax advantages relating to any capital you spend in kitting out your property. We recommend that you speak to an accountant for more in-depth information.

Yes, there are.

From a mortgage lenders perspective, a standard Buy To Let mortgage will typically require an AST type tenancy agreement to be arranged, normally for a 1-3 year period. For a holiday let mortgage, the mortgage lender will allow you to let the property on a short term basis.

For a property to qualify for tax as a furnished holiday let, HMRC has conditions that must be met. Specifically:

• Your property must be available for at least 210 days a year
• It must be let out for at least 105 days a year.

Furthermore, each individually furnished holiday-let property must be let for no longer than 31 days in a single instance. If a stay is continuous for a longer period, it is not counted towards the 105 days a year required for tax purposes.

Letting to friends or relatives at reduced rates also isn’t considered.

The primary advantage of a holiday let property, as opposed to a buy-to-let property, is that you can still deduct mortgage interest payments from rental income generated by the property, reducing profits and thus impacting the amount billed for tax. You’re also allowed to stay in the home outside the 210 day-a-year availability requirement.

With a buy to let mortgage, this is designed for long-term letting instead, and doesn’t facilitate you living in that property at any point.