How to get the ideal Airbnb Mortgage

Everything you need to know about Airbnb Mortgages

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Airbnb Mortgages

Over the past decade, the holiday rental market in the UK has exploded. Companies like Airbnb have made renting your property out to holidaymakers much easier, and as such, they now have nearly 6 million active listings worldwide.

Many people don’t think about how it will affect their mortgage when they consider renting their property out on Airbnb. As with any letting procedure, your lender needs to be aware of any changes, and you need to make sure you are on the correct type of mortgage to cover you for any issues that could occur.

An Airbnb mortgage refers to any borrowing made for a property which is being listed for rental on a site like Airbnb. These kinds of commercial Airbnb mortgages are often more expensive than typical mortgages for primary residential properties, and you may be required to provide a larger deposit, as well as pay higher interest rates, in order to secure this kind of deal.

Why do I need a specialist mortgage for Airbnb?

When you rent out your property, it is no longer considered just for residential use, so a typical residential mortgage will not usually cover the requirements. Many mortgage lenders will want you to take out a specialist mortgage in these circumstances.

It’s worth speaking to your current mortgage lender to understand their stance, as many will allow occasional single-room rental if it’s not your entire property that’s being rented out. In this case, you can continue with a normal residential mortgage. Nationwide and Metro Bank, for example, are flexible in their allowance of room rental throughout the year.

If you decide to rent out rooms in your home without confirming this with your mortgage provider in advance, you could be in breach of contract and have your property repossessed.

The benefits of being an Airbnb landlord

There are plenty of reasons why becoming an Airbnb landlord is a great idea.

Operating a rental property with great returns

The first and most obvious is the potential rental income opportunities. Although average Airbnb-style incomes sit at around £3,100 per year in the UK, depending on the location and size of your property, you could stand to earn a lot more.

Airbnb is also considered a business rather than a typical Buy to Let, so it is outside the usual tax rules. This means the mortgage interest can be offset, leaving you with more money in your pocket.

Airbnb mortgage interest tax deductions

You may also be able to deduct tax from the mortgage payments you make on your Airbnb property, as well as cleaning costs, rental commissions, and insurance payments.

It’s worth speaking to a financial advisor who will be able to give you tailored advice on what is applicable to your circumstances and how becoming an Airbnb landlord will affect your personal finances.

The other things to consider when renting your UK property through Airbnb

There are also potential downsides to renting your property on Airbnb. Firstly, you will need to make sure that there are no restrictions prohibiting this in your existing mortgage. If there are, you may need to apply for a different type of mortgage, which could be more expensive in the longer term.

There are also potential planning restrictions that could be in place in your area, preventing you from renting the property over a certain number of days per year. For example, there is currently a 90-day rental limit in London.

Again, it’s worth speaking with a financial advisor to understand what is possible for your property.

Getting a mortgage for an Airbnb property

If you are looking to purchase a new property and rent it out, there are a few different options available to you.

The first is to let out the entire property on a permanent basis for short-term lets. This is possibly the most difficult type of purchase to find a lender for, but it’s not impossible, as there are mortgage providers that specialise in holiday lettings.

The second option is to let out part of your residence on short-term lets. Some providers may allow you to take out a normal residential mortgage for this type of letting, but this isn’t particularly common.

You can also let out more than one room on a short-term let basis. This will likely mean you’re not eligible for a residential mortgage, but you will still have plenty of options for mortgaging a property of this type.

The final option is to let out the entire residence for a limited period only. Again, some lenders will allow you to use a residential mortgage for this type of letting, but they may put a limit on how long the property is let out for each year (usually around 3 months).

It should be noted that rental income will not be taken into account when it comes to your mortgage affordability assessment.

Changing your existing mortgage to an Airbnb mortgage

If you have an existing property that is currently used for residential purposes, but you’d like to start renting it out on a short- or long-term basis, you will need to speak to your existing mortgage provider to understand what the implications of this might be.

Some lenders will allow you to apply for a ‘consent to let’, which is when they will allow you to let it out but stay on your existing mortgage. You should note that you could be asked to pay additional fees or interest rates if you are accepted for a consent to let agreement.

If your mortgage lender does not grant permission to let your property out and you still wish to do so, you will most likely need to remortgage with a different lender. This could mean that you will be subject to early repayment charges with your current provider, which can be quite costly (usually between 1-5% of your outstanding balance).

If you own your property outright then you can pretty much do what you like with it. You’ll just need to make sure your home insurance policy is updated, so your new circumstances are covered.

If you own a leasehold property, it’s unlikely that you’ll be able to let it out without violating the terms of your lease. We recommend you speak to your freeholder for more information on the implications of doing so.

What happens if I don’t tell my lender that I’m renting my property on Airbnb?

We always recommend that you let your lender know if you’re planning on letting your property out in any format.

If your lender finds out that your property is being used for a purpose other than that which they have mortgaged you for, you may be in breach of your contract terms and conditions, putting you at risk of having your home repossessed or being asked to repay the mortgage in full.

Can I use my rental income to pay my Airbnb mortgage?

Whilst your rental income most likely cannot be used as proof of affordability whilst applying for your mortgage, the way in which you pay it off is largely up to you (within reason!) So yes, you can use your rental income to pay off your mortgage if you want to.

Airbnb-friendly mortgage lenders

Although Airbnb mortgages are by no means common, there are a range of lenders here in the UK that do offer them. As the popularity of Airbnb has increased in recent years, many lenders have become more flexible with their eligibility criteria and there are even some High Street lenders that have come onboard with the trend for short-term lets.

You are still more likely to get competitive and affordable interest rates through a more specialist mortgage provider who will be able to take in a broader view during their assessment. They will often consider things like seasonal fluctuations and likely rental returns when reviewing your case. It’s vital to work alongside a mortgage broker when searching for your lender to make sure you’re getting the best deal possible for your circumstances. At CLS, our brokers have a huge amount of experience in the industry, so we’re confident we can find the right mortgage provider for you!

Can it be difficult to get an Airbnb mortgage?

In comparison to getting a residential mortgage or typical Buy to Let mortgage, it can be more difficult to get an Airbnb mortgage. The travel industry in particular was hit hard during the COVID-19 pandemic, and lenders are more cautious in this area than they may have been previously due to the unstable nature of the sector at the moment.

You should also take into account additional costs that can be incurred as an Airbnb landlord. For example, you will need to pay cleaning staff (or clean the property yourself), you’ll need to make sure you have appropriate security measures in place, and you’ll need to have the means to pay for any breakages or damages.

Will a UK lender cover me for a property abroad?

The majority of UK lenders will have access to local knowledge and expertise abroad to help you secure a mortgage for a property overseas. If you’re purchasing a property outside of the UK and you intend to use it as an Airbnb let, get in touch with us, and we will do everything we can to help you get the right mortgage for your situation.

How our process works

At CLS, we want to make the process as quick and simple for you as possible. All you need to do is enter some details into our ‘Get Started’ form, and we will get in touch to start finding you the best possible Airbnb mortgage for your needs.

Wherever possible, we will provide you with a range of options and will be on hand to talk you through each of them so that you can decide which will work best for you.

We’re happy to take over the application process for you, meaning you can rest safe in the knowledge that your mortgage is being dealt with by professionals. We will provide regular updates so that you know where you are in the process and can always answer any questions you may have throughout your journey.

We also offer face-to-face mortgage advice throughout Essex and the South East of England, as well as an online mortgage advisor service via telephone and email to customers throughout the UK.

If at any point you’d like to discuss your options with us, change any information or just want to talk anything through, our friendly team are always here to help.

Why choose CLS?

We are the UK’s number one specialist mortgage advisors and have worked with thousands of applicants to help them secure the right deal in all kinds of circumstances. Whether you’ve got a poor credit history, a complex income or are purchasing an unusual building, we have seen it all – and we’ll know exactly how to assist.

We have access to thousands of exclusive mortgage offers that you won’t find anywhere else – including plenty of Airbnb Buy to Let mortgages – so you can be sure that you will always get the best deal with us.

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Gemma May

Operations Director

Gemma May

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