What is a holiday let mortgage?
A holiday let mortgage is a loan secured against a property you rent out to guests on a short-term basis, typically through platforms like Airbnb or Booking.com, or direct bookings. You cannot use a standard buy-to-let mortgage on a property you intend to run as a holiday let — using the wrong product for how the property is actually used can breach your mortgage terms. If you're weighing this up against a second home for your own use, our second home mortgage page covers how that compares.
Why buy a holiday let?
- Stronger income potential — a well-located holiday let in a popular tourist area can generate more income than a standard long-term rental, particularly across peak season
- Personal use — when the property isn't booked, you're free to use it yourself, unlike a standard buy-to-let
- Staycation demand — sustained interest in UK holidays continues to support demand for well-located holiday properties year-round
How lenders assess a holiday let mortgage
Occupancy and seasonal rental income
This is where holiday let underwriting differs most from every other mortgage type. Lenders build a projected income figure from the property's likely weekly rate across low, mid and high season, apply a realistic occupancy percentage rather than assuming year-round bookings, and test whether that income covers the mortgage at a stressed rate with healthy headroom. A strong tourist location with proven demand makes this calculation far easier to satisfy than a property with limited seasonal appeal.
Deposit
Expect to need at least 25% deposit, sometimes more. Because the loan is sized around projected rental income rather than your salary, a stronger income projection can sometimes offset a smaller deposit, depending on the lender.
Your own residential status
Most lenders expect you to have a separate main residence before they'll approve a holiday let mortgage. You don't need to own that property outright — renting or living with family can be fine — but you'll usually need to show you have somewhere else to live. This means first-time buyers who are renting or living at home can still be eligible, even though they don't yet own a home of their own.
Property type and lease restrictions
Flats and apartments can qualify, though it's worth checking the lease for restrictions — some leaseholds and management companies don't permit holiday letting at all.
Running the property day to day
- Regulatory requirements — check local planning and licensing rules for holiday lets in the area, and make sure you have buildings, contents and public liability insurance in place
- Property management — factor in cleaning and guest changeovers, particularly if you won't be based nearby, and whether you'll need a local management company
- Ongoing costs — beyond the mortgage, budget for a maintenance reserve to keep bookings and reviews strong year-round
Buying through a limited company
Some holiday let owners choose to purchase through a limited company rather than in their personal name, sometimes for tax reasons or to keep the finances separate from personal accounts. You don't have to set up a company to buy a holiday let — plenty of owners hold the property personally — but it's worth discussing the options with an accountant before you decide, since the right structure depends on your individual circumstances.
Tax changes affecting holiday let owners
The Furnished Holiday Lettings (FHL) tax regime, which previously gave holiday let owners a range of tax advantages over standard buy-to-let, was abolished from 6 April 2025. Holiday let income is now taxed under the same rules as standard rental property income:
- Mortgage interest is no longer fully deductible against rental profit — instead you receive a 20% basic-rate tax credit, the same restriction that has applied to standard buy-to-let landlords since 2020
- Capital allowances on furniture, fixtures and fit-out costs are no longer available for new expenditure, though Replacement of Domestic Items Relief still applies for like-for-like replacements
- Capital gains tax reliefs that previously applied to qualifying holiday lets no longer apply
This is general information rather than tax advice, and we'd always recommend speaking to an accountant about how the changes affect your specific position.
How Premier Mortgage Services can help
- Access to the smaller pool of lenders who specialise in holiday let mortgages
- Help putting together realistic seasonal income projections that will stand up to a lender's stress test
- Guidance on how location and occupancy assumptions affect what you can borrow
- Clarity on how the FHL tax changes affect your overall financial planning
- Support from application through to completion, whether you're buying personally or through a limited company
Frequently asked questions
How much deposit do I need for a holiday let mortgage?
Most lenders ask for at least 25%, sometimes more depending on the property and projected income.
Can I get a buy-to-let mortgage for a holiday rental instead?
No. You can't use a standard buy-to-let mortgage on a property you intend to let out as a holiday home — lenders assess the two very differently, mainly around how rental income is calculated.
Can I live in the property myself?
A holiday let mortgage isn't for use as your permanent residence, but if the property isn't booked, you're free to use it yourself.
Do I need to already own a home to get a holiday let mortgage?
You'll usually need a separate main residence, but you don't have to own it. Renting or living with family is generally fine, which means first-time buyers can still be eligible.
Do I still get tax benefits from holiday letting?
The Furnished Holiday Lettings tax regime was abolished from April 2025, so the specific tax advantages that used to apply no longer do. Holiday let income is now taxed in the same way as standard rental income.
Get in touch
If you're considering a holiday let purchase, speak to Premier Mortgage Services for advice tailored to your circumstances. Call us on 0115 949 9988 or get started via our contact page.
