Holiday let finance explained

Holiday let finance is the set of funding products used to buy, build, improve and refinance serviced accommodation and holiday let property in the UK. There is no single product, because a single coastal cottage, a refurbishment project, a former guest house being converted into serviced apartments and a portfolio of short lets all need different funding. Understanding which product fits which deal is what separates a smooth purchase from a stalled one.

This guide explains the main products: holiday let mortgages, bridging, development and commercial finance, and refinance, how lenders size loans against short-let income, and how to choose between them. We arrange all of these as a broker and introducer across specialist, challenger and commercial lenders. We are not a lender, and this is general information rather than advice.

Holiday let and serviced accommodation mortgages

The workhorse of the sector is the specialist holiday let or serviced accommodation mortgage, a term loan secured against the property and used to fund the purchase or refinance of a single short let. Its defining feature is the income assessment: rather than a single monthly rent, the lender sizes the loan on the property's projected short-let income across low, mid and high seasons, usually evidenced by a holiday letting agent's projection, and checks it covers the payment under a stressed interest rate.

These mortgages typically lend to around 70 to 75 per cent loan to value, so a deposit of roughly 25 to 30 per cent is the planning assumption, with rates sitting a little above equivalent buy to let rates because the income is more variable. Most lenders want a minimum personal income outside the let and a genuine, lettable property in a recognised holiday area. They are available on personal and limited company ownership, the latter increasingly popular since the FHL tax regime was abolished in April 2025. Our holiday let mortgage guide covers the detail.

Bridging finance for short lets

Bridging is short-term, flexible finance used when a term mortgage does not fit the situation on day one. The common cases in holiday lets are an auction purchase that must complete in 28 days, a property that needs refurbishment before it can be let, a former guest house or office being converted, or a fast purchase where a term lender cannot move quickly enough. A bridge completes the deal, and the borrower exits onto a holiday let mortgage once the property is lettable and the income is proven, or by selling.

Bridging is faster and more flexible than a term mortgage but more expensive, with interest charged monthly and arrangement costs, so it only makes sense where there is a clear, evidenced exit. It is a tool for a transition, not a long-term hold. The key to bridging well is planning the exit before you draw the loan, which is why we arrange the bridge and the exit mortgage together. Our bridging versus holiday let mortgage guide compares the two in detail.

Development and commercial finance for larger schemes

Above the single unit, the funding moves into development and commercial territory. Converting a building into serviced apartments, refurbishing a former guest house, or building new short-let accommodation is funded with development finance, which releases money in stages against build milestones and is sized on the projected value and income of the finished scheme. Once the scheme is complete and trading, it is refinanced onto a term or commercial facility.

At the top of the SA market, a block of serviced apartments or an aparthotel is a hospitality business and is financed as one. These are underwritten on trading accounts and projected income against a going-concern valuation, much like a hotel, and the loan structures reflect that. Investors moving up into aparthotel-scale assets often work with our colleagues at Hotel Property Finance, and larger conversion projects with Commercial Property Development Finance. We arrange across the whole range and match the product to the scale of the scheme.

Refinance and portfolio finance

Once a holiday let has a trading record, refinancing becomes a powerful tool. Refinancing onto better terms can cut the cost of debt once the income is proven, and refinancing to release equity can free capital tied up in a property to fund the next purchase, which is how many investors grow a portfolio without selling. A common journey is to buy with bridging, stabilise the income, then refinance onto a term holiday let mortgage and draw out equity for the next deal.

Investors with several short lets can move from financing each property individually to portfolio finance, which treats the holdings as a single facility, can simplify administration and sometimes improves terms. The right structure depends on the size and mix of the portfolio and whether it is held personally or through a company. We arrange refinance and portfolio facilities alongside purchase finance, so an investor can plan the whole funding journey rather than treating each deal in isolation.

How do you choose the right product?

Match the product to the deal and the stage. A ready-to-let single property suits a holiday let or serviced accommodation mortgage. A property that needs work, an auction purchase or a fast completion suits bridging, with a refinance onto a term mortgage as the exit. A conversion or new build suits development finance. A block or aparthotel suits commercial finance. A trading let with a record suits a refinance, and a group of lets suits portfolio finance.

Getting this right from the outset saves time and money, because applying for the wrong product, or to the wrong lender, slows everything down. A common mistake is to approach a high street bank for a property it will never lend on, lose weeks, and only then look at the specialist market that would have said yes on day one. As a broker we start with the deal and the exit, then choose the product and the lender to fit, and we can issue terms in principle before you commit, which strengthens your position with sellers and agents. We also keep the exit in view from the start, so a bridge is only ever arranged where a term refinance is genuinely fundable, and a development facility is only arranged where the finished scheme will support the debt that replaces it. We arrange the full stack across specialist, challenger and commercial lenders as an introducer and broker, not a lender.