What is a holiday let mortgage?

Full answer

Holiday let mortgages fill a specific niche between residential mortgages and standard buy-to-let mortgages, reflecting the different way holiday let properties generate income. **Why holiday lets need a different mortgage** A standard buy-to-let mortgage is designed for properties let to long-term tenants under an assured shorthold tenancy, with relatively predictable, steady rental income. Holiday lets, by contrast, generate income through short-term bookings that can vary significantly by season, meaning lenders need a different approach to assessing affordability -- most standard buy-to-let and residential mortgage lenders will not lend on a property intended for holiday letting at all. **How affordability is assessed** Holiday let mortgage lenders typically require projected rental income figures from an independent holiday letting agent, often assessing affordability based on average income across the year including quieter off-peak months, rather than assuming peak-season income applies year-round -- this is intended to ensure the mortgage remains affordable even during slower booking periods. **Deposit and interest rate requirements** Holiday let mortgages typically require a larger deposit than a residential mortgage, often at least 25% to 30% of the property's value, and interest rates are usually somewhat higher than standard residential mortgages, reflecting the perceived additional risk and income variability associated with holiday letting. **Restrictions on personal use** Some holiday let mortgage lenders place limits on how many weeks per year you can use the property yourself, since the mortgage is based on the property generating rental income for a substantial part of the year -- check your specific lender's terms if you intend to also use the property as a personal holiday home. **Furnished holiday lettings tax rules** A property let as a genuine holiday let has, historically, been able to qualify for the Furnished Holiday Lettings (FHL) tax regime, offering certain tax advantages over standard rental property -- however, the FHL regime was abolished from April 2025, so holiday let owners should check the current tax treatment carefully, since it now more closely follows the rules for standard rental property in many respects. **Worked example** Someone buys a coastal cottage intended for holiday letting. They arrange a specialist holiday let mortgage requiring a 30% deposit, with the lender assessing affordability based on an independent agent's projected average seasonal rental income across the full year, rather than peak summer income alone. **Practical tip** Use the Rental Yield calculator alongside realistic seasonal booking projections (not just peak-season rates) to check whether a holiday let genuinely stacks up financially before committing to a specialist holiday let mortgage.

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