Holiday let mortgages: a complete guide

A holiday let mortgage is a specialist loan for a property let on short stays to holidaymakers or business travellers rather than on a long residential tenancy. It is the right product because most standard residential and buy to let mortgages do not permit short-term letting, and using one for a holiday let can breach its terms. The defining feature of a holiday let mortgage is how the lender sizes the loan: on the property's projected short-let income across low, mid and high seasons, rather than on a single monthly rent.

This guide explains how holiday let mortgages work in practice: how lenders assess the income, typical deposits and rates, who qualifies, and how the product differs from a buy to let mortgage. We arrange holiday let mortgages as a broker and introducer across specialist lenders and challenger banks. We are not a lender, and this is general information rather than advice.

How does a holiday let mortgage work?

The mechanics are close to a buy to let mortgage with one important difference in the affordability test. A lender takes the property's projected holiday letting income, usually evidenced by a letter from a recognised holiday letting agent quoting low, average and high-season weekly rates, and checks that the projected income covers the mortgage payment with a margin of safety. That margin, the interest cover ratio, is typically stress-tested at a notional interest rate well above the pay rate, so the income has to do more work than the headline payment alone suggests.

Because holiday let income is seasonal and variable, lenders take a cautious view of it. Many average the low, mid and high-season figures rather than relying on peak weeks, and most expect the borrower to have a minimum level of personal income from elsewhere, often in the region of 20,000 to 40,000 pounds a year depending on the lender, as a backstop. The loan is usually arranged on an interest-only or capital-and-interest basis over a standard term, secured by a first legal charge on the property.

What deposit and rates should you expect?

Holiday let mortgages generally need a larger deposit than residential mortgages. In our experience most lenders work to around 70 to 75 per cent loan to value for holiday lets, so a deposit of 25 to 30 per cent of the purchase price is the usual planning assumption, with the keenest rates often reserved for lower loan to values. The deposit sits alongside stamp duty, which on an additional property carries the higher-rate surcharge, plus legal, survey and furnishing costs.

Rates on holiday let mortgages tend to sit a little above equivalent buy to let rates, reflecting the more specialist, more variable income. They move with the wider market, so we do not quote a fixed figure here, but the practical levers a borrower can pull are the same in any market: a lower loan to value, a stronger income projection and clean personal finances all help secure better terms. Our holiday let deposit guide covers the deposit side in detail, and the deposit and loan to value calculator on this site lets you model different scenarios.

Who qualifies for a holiday let mortgage?

Lenders look at three things: the property, the projected income and the borrower. On the property, they want a genuine, lettable holiday let in a location with real visitor demand, and some apply restrictions on unusual construction, very remote sites or properties with planning conditions that limit letting. On the income, they want a credible agent's projection that covers the payment under their stress test. On the borrower, most want a minimum personal income outside the let, a clean credit history and, for some lenders, prior property or letting experience, though first-time holiday let landlords are catered for.

Holding structure is increasingly part of the picture. Since the FHL tax regime was abolished in April 2025, more buyers are purchasing through a limited company, and a wide range of holiday let lenders lend to special purpose vehicle companies, usually with personal guarantees from the directors. Whether personal or corporate ownership suits you is a tax decision for your accountant. Our role is to match your circumstances and the property to the lenders most likely to say yes on sensible terms.

How is a holiday let mortgage different from a buy to let?

The headline difference is the income assessment. A buy to let mortgage is sized on a single, predictable monthly rent under an assured shorthold tenancy, while a holiday let mortgage is sized on seasonal short-let income, which lenders treat as more variable and therefore assess more conservatively. Holiday let lending is a more specialist niche, so the panel of lenders is smaller, deposits are usually a little higher and rates a touch above buy to let.

The other differences flow from how the property is used. A holiday let must be furnished, actively marketed and let on short stays, and many lenders cap the number of weeks of personal use. Insurance, management and running costs are higher than a buy to let because of the constant turnover. And since April 2025 the tax treatment has converged, because the FHL regime that used to distinguish holiday lets for tax was abolished, removing several advantages they previously held over standard rental property. If you are comparing the two models head to head, our serviced accommodation versus buy to let guide sets them side by side.

When might you need bridging instead of a term mortgage?

Not every holiday let purchase fits a standard mortgage on day one. A property bought at auction, a building that needs refurbishment before it can be let, a former guest house being converted, or a purchase that has to complete fast can all fall outside a term lender's appetite until the work is done or the timing eases. In those cases a short-term bridging loan can complete the purchase, with a refinance onto a holiday let mortgage once the property is lettable and the income is proven.

Bridging is faster and more flexible than a term mortgage, but it is more expensive and is meant to be short-term, so it only makes sense where there is a clear exit, usually a refinance or a sale. We arrange both the bridge and the exit mortgage together, so the whole journey is planned before you draw the first loan. Our bridging versus holiday let mortgage guide compares the two in detail, and we act as a broker and introducer throughout, not a lender.