What is a holiday let mortgage?
A holiday let mortgage is a specialist product for a property let to short-term guests, usually through a site such as Airbnb or Booking.com, or a local letting agent. A standard buy-to-let has one tenant on a long-term assured shorthold tenancy (the usual rental contract in England and Wales), whereas a holiday let sees a stream of short stays across the year.
Fewer lenders offer holiday let mortgages, so the market is narrower than for a standard buy-to-let. Rates tend to run higher and deposits usually start at 25% or more. The trade-off is that a property in a busy holiday spot can earn a good deal more than a long-term let would.
Holiday let vs second home mortgage
If the property is purely for your own use, a second home mortgage is the right fit. If you plan to take paying guests for part of the year, you need a holiday let mortgage instead. Plenty of buyers want both, staying there themselves and letting it out the rest of the time.
A handful of lenders allow a mix of personal use and holiday letting, but they will want to see how the split works. Be honest about what you intend, because letting a property out commercially on a residential mortgage can breach your mortgage terms.
Affordability and rental income
Holiday let lenders judge affordability on the rental income the property is projected to earn, and they often ask for that projection from a local letting agent or a holiday letting company. As a rule they want the projected income to cover 125% to 145% of the mortgage payments at a stress-tested interest rate (a higher rate they apply to check you could still pay if rates climbed).
Seasonal swings matter here. A place in a busy tourist area might earn well through summer and next to nothing in winter, so lenders look at the average across the year rather than the peak months.
Tax considerations for holiday lets
Holiday lets used to get favourable treatment under the Furnished Holiday Lettings (FHL) rules, which let you deduct mortgage interest as a business expense and opened up certain capital gains tax reliefs. That regime was abolished from April 2025, so holiday lets are now taxed the same way as standard buy-to-let property.
In practice your mortgage interest now falls under the same 20% tax credit restriction as regular buy-to-let, and the capital gains business reliefs have gone. Speak to a tax adviser so you know how that shifts the numbers on a holiday let before you buy.
Get specialist holiday let advice
Holiday let mortgages are specialist ground, and they call for a broker who knows this part of the market. At Clearview Mortgage Solutions, we can reach lenders with competitive holiday let products and take you through the application from start to finish.
Contact us for a free, no-obligation chat about your holiday let plans, and we will help you weigh up the costs, the income it could earn, and the mortgage options open to you.