Holiday let mortgages FAQs

What is a holiday let mortgage?

What makes a holiday let mortgage different to other types of mortgage is the fact that one of the principal purposes of owning the dwelling is to let it on a short-term basis to tenants – it is the short-term nature of the tenancy and not whether the tenant is actually “on holiday”.

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So what is meant by a short-term let?

UK tax authorities attach a specific definition to short-term lets as applied to furnished holiday lettings.

For tax purposes, each letting must be no longer than 31 days and the property concerned must be available for letting for at least 210 days a year.

The definition continues to apply only on condition that lettings of longer than 31 days account for no more than 155 days a year.

Why is this relevant to the type of mortgage?

When you arrange a mortgage on any type of property, it is important that the lender knows your intentions for the use of the dwelling. A regular residential mortgage, for example, is appropriate if you intend to occupy the home as your principal place of residence – and the loan is regulated by some quite strict rules imposed by the Financial Conduct Authority (FCA) as a result.

If your intention is to let the property to tenants, on the other hand, the lender regards your purchase as a commercial investment. The loan is then not subject to regulation by the FCA and the affordability of the mortgage takes into account the commercial returns in the form of rents received.

It is important that the mortgage lender is accurately informed about the use to which the property is to be put. Deception on the part of the borrower may, in the most blatant of cases, be considered as mortgage fraud.

Are holiday let mortgages difficult to get?

Property designed and intended for holiday lets may be different to other types of dwelling. The nature of their occupation and the affordability of the mortgage loan needs to take into account differences in use.

In short, holiday let mortgages are typically more difficult to secure.

What if I’m an expat?

If you are an expat, a holiday let mortgage which is already difficult to get, may be even more difficult to arrange.

Expat holiday let mortgages, therefore, are likely to be arranged on a case by case basis, taking into account not only the projected income to be derived from the investment but also the net worth of the individual seeking the mortgage. As result, lenders interested in such loans may be few and far between.

A specialist mortgage broker, therefore, may provide the particular knowledge of the mortgage market to identify likely sources of borrowing.

Are there conditions attached to the location of the property for expat holiday let mortgages?

In order to qualify for the definition of a furnished let property under UK tax provisions, the dwelling itself must be located within the UK or the European Union.

What qualifications might I need as an expat?

Different lenders are likely to apply different criteria when assessing your eligibility for an expat holiday let mortgage. These typically relate to a potential lender’s ability to judge your capacity to repay the loan and to your connections with the UK.