A Guide to Airbnb Mortgages

A Guide to Airbnb Mortgages

If you are looking to buy a property to use as an Airbnb, or you have an existing property that you want to convert into an Airbnb, then you will probably have wondered what the mortgage requirements are. We have put together everything you need to know.

What kind of mortgage is required for an Airbnb?

There are no specific mortgages for Airbnbs, but you can secure a mortgage for a property that is intended to be an Airbnb. The type of mortgage you will need depends on how you intend to let the property. For example, whether you are letting out the entire property or just a few rooms.

Residential mortgages

It may be possible to offer a short-term let such as an Airbnb with a standard residential mortgage, if you are only planning on letting out a room or two, rather than the whole property. However, you must disclose your plans to your mortgage provider in case they view it as a breach of the agreed terms.

If you want to let out the entire property as an Airbnb, then you may need to consider changing your residential mortgage for a buy-to-let instead, but whether this is permitted will be at the lender’s discretion.

Buy-to-let mortgages

A buy-to-let mortgage is more suitable if you want to let out the entire property as an Airbnb, but the lender will likely set limits on how long your property is available for holiday lets in the calendar year (often 90 days).

Because of this limit, a buy-to-let mortgage may not be the best option from a financial standpoint if you want the property to primarily be an Airbnb unless you can also secure short-term tenancy agreements to fill in the gaps in the calendar.

Holiday let or short-term let mortgages

The final Airbnb mortgage option is a holiday let mortgage or a short-term let mortgage. Holiday let mortgages are already intended for properties offering short-term lets, so they are well suited for Airbnb hosts too. You will need to disclose your Airbnb plans to your lender, but most will be happy to give you the green light.  

If you have a second home or holiday home mortgage, you may be able to let it as an Airbnb with your lender’s permission.

How is eligibility determined?

Most lenders will base their decision on your projected rental income and the rental return, which is the difference between your income and mortgage repayments. Most lenders will expect a rental return of 125-145% before they approve a mortgage.

Some lenders may also require you to have an additional income in case the rental returns are lower than expected, or you have gaps between tenants that affect your overall rental income. Similarly, a good credit rating will help to show a mortgage provider that you are low risk, making you more likely to be approved.

In terms of a deposit, most lenders require a minimum loan to value (LTV) of around 75-80%, meaning you will need to put down 20-25% of the property value as a deposit.

Finding an Airbnb mortgage broker

Many high street lenders will not offer mortgages for Airbnbs, so it is best to use a mortgage broker that specialises in mortgages for Airbnbs and short-term lets, as they will be able to help you find the best deal.

If you need a specialist buy to let mortgage broker to help you find the best Airbnb mortgage for your property, then please contact us.