We’re proud to offer same day Decision in Principles*.

Can you Airbnb on a Residential Mortgage?

Get in touch for a free, no-obligation chat with an adviser about how we might be able to help.

[]
1 Step 1

By submitting your details in this form, you agree to occasional marketing information via email around relevant products and services. You can opt-out of this at anytime

reCaptcha v3
keyboard_arrow_leftPrevious
Nextkeyboard_arrow_right
FormCraft - WordPress form builder

Can you Airbnb on a Residential Mortgage?

If you are considering purchasing a property to rent out as an Airbnb, or are planning to let your home on Airbnb, you might have several questions about your mortgage options and the compatibility with short-term lets.

Some of the questions we often hear are:

  • What mortgage do you need for Airbnb?
  • Do you need a buy to let mortgage for Airbnb?
  • Can you Airbnb on a residential mortgage?

 

But don’t worry. GPS Financial has been offering expert mortgage advice for over a decade and has the expertise to advise on any type of mortgage, including those for Airbnb.

Here’s some helpful information to help you understand what mortgage you’ll need for an Airbnb. But first, let’s explore short-term lets and understand how holiday rentals differ from standard residential properties.

Understanding short-term lets

Short-term lets are regarded as anything under 6 months. Anything between 6-12 months is considered a mid-term let, while anything over 12 months is a long-term let.

There are specific rules around Airbnb and short-term lets in some cities. For example, in London, a short-term let must be under 90 days to conform.

Short term lets mainly include:

  • Holiday rentals
  • Serviced apartments or houses
  • Temporary short-term housing

 

Holiday rentals are by far the most common form of accommodation on Airbnb, although you’ll also find serviced apartments for businesses on there too.

Holiday rentals have always been a lucrative form of investment, but the arrival of Airbnb turned the entire industry on its head.

Not only did it provide the opportunity for anyone to make money from short-term lets, but it also increased prices across the board. If you’re looking for an investment opportunity, Airbnb could be just what you’re looking for.

The platform is easy to use and enables almost anyone, anywhere to rent out a property for short-term rentals.

But remember, Airbnb varies from the traditional residential use of a property, and therefore acquiring a property for this short-term use will change the way you can finance it. 

What mortgage do you need for an Airbnb?

If you’re considering investing in this market, you might be wondering… Can you Airbnb on a residential mortgage? Do you need a buy to let mortgage for Airbnb? Let’s get into it.

Do you need a buy to let mortgage for Airbnb?

You don’t always need a buy-to-let mortgage for an Airbnb.

If you live in the property and want to let out part of it through Airbnb, you may be able to Airbnb on a residential mortgage. That means you may not need a new mortgage, but you will need to check with your mortgage provider to avoid breaching the terms of your existing mortgage.

If they agree, you can rent out part of your property without a new mortgage. However, not every lender will permit you to change the use of your home like this.

If you want to buy a property to let out purely as an Airbnb, you will need a holiday let mortgage.

Some lenders will help you switch from a residential mortgage to a holiday let mortgage, but most will require a new mortgage application.

Holiday Let Mortgage and Buy To Let Mortgages

You have two main mortgage options if you’re considering Airbnb: holiday let mortgages and buy to let mortgages.

A holiday let mortgage is a specialist product that allows you to rent out your property on Airbnb and other platforms.

Some lenders allow you to also use the property yourself for up to 90 days per year.

To qualify for a holiday let mortgage, a lender will look at your own income and the income potential of the property. That includes local market conditions and rental potential.

Due to the higher risk associated with short-term lets, there is often a higher deposit requirement to qualify for this type of mortgage.

A buy to let mortgage is designed for medium to long-term lets covered by an Assured Shorthold Tenancy (AST).

The rental calculation for the mortgage will be made on rental income over the longer term and not your personal income.

The location and local market conditions are less of an issue when applying for a buy to let mortgage but you cannot live in the property yourself at any time with this type of mortgage.

Speak To An Expert

Giving you peace of mind while you sit back and let us do all the work for you while finding you the best deal for your financial situation.

Things to consider before switching to Airbnb

Becoming an Airbnb host is quick and easy but the preparatory stages can take much longer.

As this is a business, you’ll need to perform due diligence before committing and make sure the local market can support an Airbnb.

We recommend:

  • Checking the number and type of short-term lets in the area – Competition analysis is crucial. You don’t want to invest in an overly saturated area or a location where there is little demand.
  • Ensuring you have the time and energy to manage the Airbnb – Short-term lets aren’t as intensive as B&Bs, but they will demand time and energy on each changeover, managing guests and addressing any issues.
  • Checking your mortgage options and eligibility – Do you plan to rent out part of your home or buy a new property? Would you qualify for a holiday let mortgage?
  • Check charges and fees associated with a new mortgage and Airbnb – Running an Airbnb is a business and, as such, comes with financial liabilities. As does a mortgage. Make sure you’re aware of both.

 

Once you have completed the first two steps, GPS Financial can help with the rest. We can help shortlist and secure competitive holiday let mortgages from a range of lenders. We’ll even help you with the paperwork too!

Can you change your existing mortgage to an Airbnb Mortgage?

As we mentioned earlier, there are lenders out there who will let you switch from a residential mortgage to a holiday let mortgage. In most cases, though, you will need to apply for a new mortgage.

There is no such thing as an ‘Airbnb mortgage’. This is a term used when referring to holiday let mortgages which you’ll need to become an Airbnb landlord.

Assessing your eligibility for a Holiday Let Mortgage

Holiday let mortgages are a niche type of finance with various eligibility criteria.

A lender will want to assess:

Personal income – Even though it’s a business, the nature of short-term lets means you may have to pay the mortgage out of your own money. Expect the same affordability checks as a residential mortgage.

Credit history – Your credit history will also play a part in eligibility. If you have a good credit history, everything should be fine. If you don’t, you may want to work on that before applying. We do work with some lenders who can offer mortgages to people with bad credit, talk to us to find out more.

Deposit Holiday let mortgages will usually require a higher deposit to cover the extra risk associated with short-term lets. Expect to provide at least 25% of the property price as a deposit.

The property – The property you’re planning to rent out will likely need to undergo a valuation and survey to ensure it’s worth the money.

Rental forecast – As the property will be a business, a lender will want to know how much rental potential it has. You’ll often be expected to earn 145% or more of the mortgage payment to pass the stress test.

That may sound like a lot, but when you work with GPS Financial, we’ll handle most of the hard work for you. We’re here every step of the way to help you realise your business potential.

Airbnb and mortgages

We hope this information helps you understand whether you need a buy to let mortgage for your Airbnb.

Have you asked your current lender if they are willing to permit you to rent out part of your home? Planning to buy a property to rent out for short-term lets?

If you answered yes to those either of those questions, contact GPS Financial today to discuss your situation.

Why GPS Financial?

Leading property finance specialists
We remove the stress and the paperwork
Match you with the right deal for you
No case too big or too small