Are you a landlord looking to make money from Airbnb rentals in the UK?
If so, it is important to understand the type of mortgage you need for your property. With more and more people turning to short term rental services like Airbnb, there are several considerations when it comes to financing an investment property.
From understanding how much capital you need upfront and which lenders offer mortgages specifically tailored for this type of activity, to exploring different types of mortgages such as buy-to-let or interest only options – knowing what works best for your situation can save time and ensure that your investment yields maximum returns.
We have extensive experience helping landlords secure the right mortgage solution for their short term rental needs in the UK market. We’re passionate about enabling our customers to make smart investments with peace of mind, maximising their return on investment through successful rent strategies and financial planning tactics.
What is airbnb?
Airbnb, founded in 2008, is an online marketplace that allows individuals to rent out their properties or spare rooms to guests on a short-term basis. It works similarly to traditional hotels, but with much more personalised experiences and greater flexibility.
As a host, you have the opportunity to provide your guests with comfortable and unique stays and be part of a global community of hosts.
One of the reasons airbnb has become so popular over the years is due to its wide range of accommodation options that are available all around the world.
From private rooms in apartments or homes, to entire homes, castles or even boats – Airbnb offers something for everyone. This variety makes it easier for people travelling for work or leisure to find suitable accommodation that is tailored to their needs.
For example, if you’re looking for a family getaway with plenty of room for your children, then renting an entire house may be just what you need.
The UK airbnb market has experienced significant growth since its inception and continues to expand.
Being a host on Airbnb provides an additional source of income whilst connecting you with people from all over the world who can appreciate your hospitality; it is an excellent way to earn money while meeting new people in various countries or city neighbourhoods – making it truly an international sharing economy platform!
How does an airbnb property work?
Airbnb properties are an increasingly popular way of making money in the UK. An Airbnb property is any space that is owned or rented out to guests on a short-term basis, usually for a period of one night to a few weeks. Hosts can list their property on the Airbnb website, detailing size and amenities available as well as setting their own prices and rules. Guests can then search through the listings and book a stay at their chosen property, with payments made securely through the site.
Before listing your property on Airbnb, you must be aware of any local laws and regulations regarding home-sharing in your area – some areas may require that hosts register with their local authority before taking bookings. You will also need to decide which kind of hosting style you want to offer – do you want to interact with your guests or not? It’s up to you how involved in the rental process you become but generally speaking it’s best for both parties involved if there is some form of communication between them.
Hosts are expected to make sure their properties meet certain safety requirements before listing them on Airbnb. This includes ensuring adequate fire safety, smoke detectors and carbon monoxide alarms; all electrical appliances must be properly tested and certified; bedding must be clean and free from dust mites; all access points must be secure; and all furniture needs to comply with current health & safety standards. Of course this list isn’t exhaustive so once again it’s important that hosts check landlord laws in their area when listing properties on Airbnb
When it comes to selecting guests, hosts should take the time to read reviews left by past customers as well as look into the profiles they create when signing up with Airbnb. Reviews are an extremely useful tool when it comes to judging how reliable potential guests could be; however it’s worth noting that these opinions may not always paint an accurate picture of someone so use your own judgement here too!
Finally, there is always an added risk associated with becoming an Airbnb host – potential damage or theft from guests – so having appropriate insurance cover can help protect against financial loss should something untoward happen during a stay.
What kind of mortgage do you need for an Airbnb?
An Airbnb property could be classed as a holiday let or perhaps serviced accommodation, depending on the setup.
By their nature, both of these are short term lets and neither will allow the occupants to use the property as their permanent residence. Because of this a normal residential mortgage is not suitable.
It is not surprising that most people consider a buy to let mortgage as the best type of mortgage required. While it definitely allows the property to be rented out, it does not permit short term lets, which is the very definition of holiday letting.
Our Buy to Let vs Holiday Let article explores them both.
The type of mortgage you need will be determined by how you intend to use the property
Rent out a room occasionally
You would need to inform them, but most lenders will probably be OK with this.
Occasionally rent the whole house
A residential lender will not be so keen to have your home rented out for parts of the year. A residential mortgage is priced and granted on the basis that it will be for your main residence.
If this relates to a holiday home, then lenders offering holiday home mortgages will normally expect a small amount of letting. You should check but up to 90 days a year is normally permitted.
Actively renting the whole house
This property can no longer be classed as your main home. So the most appropriate mortgage would be a holiday let mortgage or perhaps a serviced accommodation mortgage, both are very similar.
How to get a mortgage for an Airbnb property
There are a relatively small number of lenders offering these airbnb mortgages and many of them prefer to work with mortgage brokers and intermediaries.
Because of this your best course of action will be to discuss your plans with a holiday let mortgage broker, such as ourselves.
You will find that the main high street lenders aren’t really interested, or experienced, in these types of mortgage. Many of our clients work for themselves, so we can arrange holiday let mortgages for the self-employed with a number of lenders.
Our advisers are very experienced in helping expats with their holiday let mortgages, or maybe you want to use an SPV Company to buy the holiday let.
As a specialist in the sector, Drake Mortgages has built up strong connections with lenders over the past 19 years. Our advisers will be able to secure your finance at competitive rates and provide a very bespoke service.
Changing your existing mortgage
Each type of mortgage is suitable for a different style of occupation.
So if you currently have a buy to let property (with a BTL mortgage) and you wish to change the use to holiday let/Airbnb, you will need to change the mortgage type over to a holiday let mortgage.
Depending on the lender it may be possible to do this internally.
Otherwise it is necessary to remortgage over to a holiday let lender.
What happens if I don’t tell my lender?
We will always advise landlords to inform their lender of the correct letting style. If your lender finds out then you will be in breach of the mortgage conditions. At that point the lender may be permitted to request full and immediate repayment of the mortgage.
Can I go from Airbnb back to buy to let?
Yes, of course. Again, depending on the lender this could be an internal change or it could require a remortgage.
What is a restrictive covenant?
A restrictive covenant is an entry on the title deeds governing how the property can be used. Usually these originate from the initial seller of the property (developer builder) and relate to noise and running a business from the property. Restrictive covenants are binding and often come with penalties if they are not adhered to.