How much deposit do you need for a holiday let?

A holiday let deposit is the share of the purchase price you fund yourself, with a holiday let mortgage covering the rest. It is one of the first questions buyers ask, and the answer is usually larger than for a home purchase: holiday lets are a more specialist lend, so lenders ask for more equity in the deal. In our experience most lenders work to around 70 to 75 per cent loan to value, which puts the typical deposit at roughly 25 to 30 per cent of the price.

This guide explains how much deposit a holiday let needs, what pushes the figure up or down, how buyers raise a deposit from existing property, and the other costs to budget for alongside it. We arrange holiday let finance as a broker and introducer, not a lender, and this is general information rather than advice.

How much deposit does a holiday let need?

As a working assumption, plan for a deposit of around 25 to 30 per cent of the purchase price. That reflects the loan to value most holiday let lenders work to, typically capped around 70 to 75 per cent, though a minority will stretch a little higher for strong cases and many reserve their best rates for lower loan to values where the deposit is larger. On a 400,000 pound cottage, a 25 per cent deposit is 100,000 pounds and a 30 per cent deposit is 120,000 pounds, before any of the other purchase costs.

The deposit is not the only cash you need at the outset. Stamp duty on a holiday let usually carries the higher-rate surcharge that applies to additional residential property, and you will also pay legal fees, a survey and valuation, the cost of furnishing the property to a lettable standard, and ideally a buffer for the period before bookings build up. Budgeting only for the deposit and being caught short on the extras is one of the more common planning mistakes we see.

What pushes the deposit up or down?

Several factors move the deposit a lender will ask for. A stronger, well-evidenced income projection that covers the mortgage comfortably under the lender's stress test supports a higher loan to value and so a lower deposit. A prime, year-round lettable location is viewed more favourably than a remote or highly seasonal one. Your personal income, credit history and experience all feed in, as does the property type, with standard construction in a recognised holiday area easier to lend against than unusual buildings or those with restrictive planning conditions.

The holding structure matters less to the deposit than people expect: lending to a limited company is well established and the loan to value is broadly similar, though pricing can differ. The biggest single lever is usually the income evidence. A credible agent's projection of low, average and high-season income, presented well, can be the difference between a lender's standard and stretched loan to value, which is precisely the packaging work we do as a broker.

Can you raise a deposit from existing property?

Many holiday let buyers do not fund the deposit purely from savings. If you already own property with equity in it, you can often release some of that equity to use as the deposit on the holiday let, either by refinancing the existing property onto a new mortgage that releases cash, or by taking a short-term bridging loan against it. This is a common way for existing landlords and homeowners to grow into holiday lets without selling anything.

Each route has a cost and a risk. Releasing equity increases the borrowing secured on your existing property, and a bridge carries higher interest until it is repaid, so the combined position has to be modelled honestly against the new let's income. We arrange both the equity-release refinance and the holiday let purchase mortgage together, so the whole structure is priced before you commit. Investors building a portfolio this way often look at Buy to Let Finance for the existing residential side alongside the holiday let purchase.

What other costs sit alongside the deposit?

Beyond the deposit, build a realistic day-one budget. Stamp duty is usually the largest single extra: holiday lets generally attract the higher-rate surcharge on additional residential property, so check the current rates for the relevant UK nation, as Scotland and Wales operate their own land transaction taxes. Then add legal fees, the lender's valuation and your own survey, mortgage arrangement and broker costs, and buildings and contents insurance written for holiday letting rather than standard cover.

Furnishing is the cost holiday let buyers most often underestimate. A holiday let has to be furnished and equipped to a standard that photographs well and earns good reviews, from beds and sofas to kitchenware, linen and the extras that lift a listing, and that can run to several thousand pounds even for a modest property. Allow a working capital buffer too, because bookings take time to build in the first season. Our how to buy a holiday let guide sets the deposit in the context of the whole purchase.