Holiday let mortgages

How do lenders assess holiday let income?

This is where a holiday let mortgage diverges most sharply from a standard buy-to-let. Rather than testing a single assured shorthold tenancy rent, the lender works from a projection of short-let income built across the seasons. The usual method takes the weekly rate the property can achieve in low, mid and high season, averages them, and multiplies by a realistic number of let weeks rather than a full fifty-two, because no holiday let is occupied every week of the year. That gross figure is then reduced for the costs that short letting carries, cleaning, management or platform fees, utilities, insurance and maintenance, before interest cover is tested against the net. Lenders want evidence behind the projection, typically a letting assessment from a recognised holiday-let agent, comparable listings on the booking platforms, or the property's own trading history if it is already let. A property with two or three years of booking records behind it is far easier to place than one being projected from scratch.

Interest cover then sizes the loan. The lender stresses the projected net income against the interest payments at a rate above the day-one pricing and wants the income to cover the cost with a clear margin, commonly somewhere around 125 to 145 percent depending on the lender and whether the rate is fixed. Location does a great deal of work here, because occupancy and achievable rates vary enormously between a honeypot coastal town, a national park village and an off-the-beaten-track rural plot, and lenders price that difference directly. We model the cover calculation against a realistic, defensible projection rather than an optimistic one before any application goes in, so you know your true borrowing capacity and the deposit you need before you offer, not after a down-valuation lands. For investors comparing the numbers against a conventional let, our sister desk at Buy to Let Finance covers standard buy-to-let mortgages, and the contrast in income treatment is usually the deciding factor.

What are holiday let mortgage rates and repayment options?

Interest rates on holiday let mortgages start from around 6.5 percent and move with loan to value, location, the strength of the projected income and the lender's cost of funds. A well-located property at moderate leverage with an established letting record prices at the keener end of the range; a remote location, thin comparable evidence or pushed leverage costs more. You can fix the rate for an initial period for payment certainty across the seasons, or take a variable rate over a reference rate if you expect to sell or refinance within a few years. Arrangement fees typically run at 1 to 2 percent, with valuation and legal costs on top, and early repayment charges on fixed rates vary widely between lenders, which matters if you might sell or refinance inside the fixed period.

Repayment structure matters as much as the headline rate, and the seasonal income pattern makes it more important than on a standard let. Interest only keeps monthly payments low and steady, which suits an owner managing cash flow through quiet winter months and banking the summer surplus, while a capital repayment profile reduces the debt over the term and can earn slightly finer pricing because the lender's exposure falls every year. Many holiday let investors take interest only and set aside the high-season income separately. We model each repayment structure against the projected income the property actually produces across a realistic year, including the lean weeks, so the mortgage fits your plan for the property rather than assuming a level monthly rent that a holiday let never earns. If you expect rates to fall, a shorter fix or a variable rate without early repayment charges preserves the option to reprice later, and we set out what each path costs in cash terms over a realistic hold period.

What deposit do you need for a holiday let?

Plan for a deposit of around 25 to 30 percent of the purchase price, the mirror of the 70 to 75 percent loan to value most holiday-let lenders will advance. A strong location with an established letting record and a sensible projection sits at the lower end; a remote property, a speculative projection or stretched interest cover pushes the deposit requirement up. On top of the deposit sit the transaction costs: stamp duty land tax, often at the higher rate that applies to additional dwellings, the lender's valuation fee, legal costs for both sides and the arrangement fee, which together commonly add several percent to the cash required. Furnishing a holiday let to a lettable standard is a real cost too, because guests and platforms expect a fully equipped property from the first booking, and that spend needs to sit in the budget rather than being an afterthought.

The deposit does not always have to be cash from savings. Equity in another property can be released by refinancing it, or a second charge can support the purchase, and where you already own holiday lets a portfolio facility can cross-collateralise them to reduce the cash deposit on the next acquisition. Each route has a cost and a risk, and some lenders dislike fully borrowed deposits, so the funding stack needs assembling honestly. Where the property is being held in a limited company, the deposit is usually introduced as a director's loan, and lenders will want to see it evidenced and may ask for it to be documented. We structure the whole package, deposit included, and tell you which lenders will accept it before you commit. Lenders also expect a sensible cash reserve after completion, because a poor season or an unexpected repair should not put the loan under strain.

Should you hold a holiday let personally or in a company?

This question changed materially in April 2025, when the Furnished Holiday Lettings tax regime was abolished. For years, FHL status carried specific tax advantages over a standard let, and many investors held holiday lets personally to capture them. With that regime gone, the old FHL tax treatment no longer applies, and the structuring decision now looks much more like the wider buy-to-let conversation, where many investors hold property in a limited company or SPV for the way borrowing costs and profits are treated. We are not tax advisers and do not give tax advice; what we can say is that lenders are entirely comfortable lending to either a personal borrower or a company, and the right structure for you is a question for your accountant, taken before you buy rather than after.

From the finance side, the practical differences are straightforward. Lending to a limited company is generally unregulated business lending, and lenders typically take a charge over the property, a debenture over the company and personal guarantees from the directors. Personal ownership can bring a case within the regulated mortgage perimeter in some circumstances, particularly where the security is linked to the borrower's own home, in which case we refer it to an appropriately authorised firm. Rates and leverage are broadly similar between the two routes with specialist holiday-let lenders, though the exact panel differs, so the choice rarely costs you much on the finance itself. For investors building a company-held portfolio, our sister desk at Limited Company Property Finance covers SPV and company lending in depth. We arrange the finance for whichever structure your accountant recommends and place the case with the lenders who suit it.

Can you refinance or remortgage a holiday let you already own?

Yes, and for many owners the remortgage is where real value sits. If the property has built a letting record showing stronger income than the original projection assumed, if you have improved the property to lift its achievable rate, or if values in the area have moved on since the current loan was arranged, a refinance can cut the interest rate, extend the term or release equity against the higher income and valuation to fund the next purchase. Holiday lets are often bought before they have a trading history, on a cautious projection, so loans arranged at the outset are frequently secured against income figures that the property has since beaten. Even without releasing equity, repricing a loan arranged when rates were higher can cut the annual cost materially, and the saving compounds over the remaining term.

A remortgage is underwritten much like new money: the projected and actual short-let income, the interest cover, the location, the planning and licensing position, and the property itself. We review the whole market at each refinance rather than rolling onto the incumbent lender's renewal terms, because loyalty is rarely rewarded in specialist lending. Where you hold several holiday lets, we also look at portfolio facilities that bring the properties under one loan, which usually releases more capital and simplifies the banking, at the price of cross-default between the properties. The right answer depends on how long you intend to hold each property and how its income has performed, and we put the comparison in writing so the decision is yours on full information.