Holiday let mortgages

The short answer

A holiday let needs its own type of mortgage. A standard buy-to-let mortgage usually only allows a normal tenancy. Holiday let lenders work out what you can borrow from expected weekly rents, and most want a 25% deposit.

How lenders work out the income

Because there is no tenancy, the lender asks a letting agent or the valuer for the expected weekly rent in the low, mid and high seasons. They average the three and multiply by a number of weeks, often around 30 to 40, to reach an annual figure. That income then has to cover the interest by a set margin, often 125% to 145%, at a stress rate.

Some lenders use the long-term rent instead, which is usually lower. That is why the choice of lender changes how much you can borrow.

A worked example

Weekly rents are £450 low, £700 mid and £1,100 high season. The average is £750. Over 32 weeks that is £24,000 a year, or £2,000 a month. At a 125% test and 5.5% stress rate, the maximum loan is £24,000 ÷ (1.25 × 0.055) = £349,091, before the lender's other limits.

What else lenders look at

• Personal use. Many lenders let you stay in it yourself for a limited number of weeks a year. Check the limit before you buy.
• Location and demand. Proven holiday areas are easier. A lender may want evidence from a local agent.
• Experience and income. Some lenders want a minimum personal income or existing landlord experience.
• Planning and restrictions. Some properties have planning conditions or covenants that limit holiday use. Your solicitor should check.

What changed for tax in April 2025

The furnished holiday let (FHL) tax regime was abolished from 6 April 2025. Holiday lets are now taxed like other rental property. In particular, individuals can no longer deduct mortgage interest in full: they get a 20% tax credit, the same Section 24 rule that applies to buy-to-let. Companies still deduct interest as a cost. Speak to an accountant about your own position.

Councils can also charge a premium on second homes. In England, many now charge up to double council tax on furnished homes that are no one's main residence, unless the property qualifies for business rates as self-catering accommodation. To qualify in England it must be available to let for at least 140 days a year and actually let for at least 70. Rules in Scotland and Wales are different.

Is a holiday let mortgage regulated?

A mortgage for a property you let to holidaymakers as a business is usually not regulated. If you or your family will use it as a home, even part of the year, it may be. We can only help with the business case for now.

Common questions