Holiday let mortgages are provided by lenders that allow the applicants to borrow money to purchase or refinance properties that will be let out on a short-term basis to paying guests.
Mortgages offered on a holiday let basis contain clauses specific to the business of holiday letting. So, as an example, their mortgage offers contain a clause disallowing any form of long term letting on an Assured Shorthold Tenancy (AST) basis. So the property can be used as a holiday but cannot be used as a buy to let.
Some of these mortgage products allow personal use by the borrower, for a restricted period each year. Up to 90 days per annum is available, however these loans are not classed as holiday home mortgages, which are used to finance properties that will be used exclusively by the borrowers or their family.
What’s the difference between a buy to holiday let and a buy to let mortgage?
There is often some confusion between the two types of mortgage and this situation is not helped by some lenders calling their holiday let products “buy to holiday let mortgages or holiday buy to let mortgages”
Both mortgages do allow the property to be let out. However, it’s the letting duration and type of guests which are the differences.
A BTL mortgage, is designed to allow applicants the opportunity to purchase or refinance properties that will be let to tenants, on a long-term basis, usually subject to an agreement called an “Assured Shorthold Tenancy” (AST). This type of tenancy creates statutory rights and obligations between the parties, with the borrower/property owner being known as a Landlord.
The owner of a holiday let is not considered a landlord in Law.
Holiday letting is classed as a business by HMRC. The mortgages are designed for properties that will be let on a seasonal and temporary basis to customers. The income from a holiday let property will fluctuate, according to seasonal variations. Therefore, in most cases, affordability for a buy to holiday let mortgage, is assessed against the low, medium and high season accommodation rates for a given area, before a ratio is applied.