Can you get a buy to let mortgage for a holiday home?

If you plan to buy a holiday home to let out to guests, or own one already and want to start letting it out, then you need to make sure you have the right mortgage.

Rules around holiday lets and tax have changed recently so it is more important than ever to check you understand the new rules, which treat holiday homes in the same way as other buy-to-let properties.

Here’s our guide to getting the right holiday home finance.

What types of mortgages are available when buying a holiday home?

If you’re buying a holiday home, the type of mortgage you need will depend on how you want to use the property.

If the property will be used exclusively as your own holiday home (meaning you can also allow friends to stay there free of charge), then you will need a straightforward residential second home mortgage.

However, if you plan to let out your holiday home on a regular basis to generate income, then you will need a special holiday let mortgage – or at the very least, special permission from your mortgage lender (which will usually only be short term).

Here you can find out more about holiday let mortgages.

What is a holiday let mortgage?

A holiday let mortgage is a special type of buy to let mortgage for buying a property that will be let only for certain periods of the year, rather than on an ongoing basis.

If you want to buy a holiday home for yourself but also let it out when you’re not using it, this is the kind of mortgage you’ll need.

The key difference is due to the fact that a holiday let is a seasonal business, unlike a standard rental property.

Holiday lets tend to make most of their money during the warmer months of the year, and might be largely unused at other times.

This makes such properties more of a risk for a mortgage lender, so the criteria will be much stricter.

Mortgage lenders will require proof that your property complies with regional licensing law such as the mandatory short-term let registration schemes in England, or full licensing frameworks in Scotland and Wales, before they will approve your mortgage.

How does a holiday let mortgage work?

As with any mortgage, the lender wants to make sure you can afford the monthly repayments and will be able to keep paying them in a range of different circumstances.

In your mortgage application, your lender will look at your income and your other spending commitments (e.g. other mortgages, loans and debts that must be serviced) to work out whether you can afford the new mortgage.

When assessing your income, the lender will consider the income you are likely to make from the holiday let itself.

However, they will also want to verify that you could continue to pay your mortgage on the property even if you failed to get any guests for a period of time.

If you can demonstrate that you’d still have enough spare income to pay the mortgage while the property is unoccupied, you stand a much better chance of having your mortgage approved.

What are the lending criteria for holiday let mortgages?

For most holiday let mortgages, you will need to meet the following criteria:

• A deposit of at least 25% of the property’s value, perhaps even as high as 40%.

• Rental income of typically 145% of the interest payable on the mortgage.

• A minimum income of between £20,000 and £40,000 in addition to any rental income.

• Usually, you must already be a homeowner.

Here’s an example of how it works:

Imagine you have your eye on a coastal cottage in Dorset on the market for £250,000. Meeting a typical 25% lender deposit requirement means you will need £62,500 upfront, leaving a mortgage balance of £187,500.

Assuming a specialist 2-year fixed holiday let interest rate of 5.8% taken on an interest-only basis, your baseline interest payments will total £10,875 per year (£906.25 per month).

Lenders must stress-test your application to ensure you can afford your repayments if rates rise or there are fewer holidaymakers. 

They will require your projected gross rental yield to cover 145% of the mortgage interest. Therefore, a specialist holiday let agent must verify that the property can generate a minimum seasonal rental income of £15,768 per year.

Holiday let mortgages are growing in popularity, but are still something of a niche product.

This may limit the deals available to you. You may have more options if you own several properties already (e.g. other holiday lets or ordinary buy-to-lets), as you could use these other properties as collateral on the loan.

Either way, a mortgage broker can improve your chances of finding the right deal.

Use our Mortgage Calculator to find out how much you could borrow, how much it might cost a month and what your loan to value ratio would be.

What are the tax implications of a holiday let?

Your investment in a holiday let can have considerable tax implications.

For example, when you sell your property, you may have to pay capital gains tax (CGT) on any increase in its value during your ownership. You will also need to pay tax on your rental income.

Furnished holiday lets (FHL) used to have tax advantages compared with other types of buy to let but this has not been the case since April 2025.

Holiday lets are now treated as standard UK property businesses for tax purposes, meaning you must navigate the same rules as long-term landlords.

As a result of these changes, special capital gains tax treatments are no longer available. Owners can no longer claim business asset disposal relief, which previously allowed a lower ten percent tax rate, nor can they access business asset rollover relief or gift holdover relief.

Instead, any profits made when selling a holiday home are taxed at standard residential capital gains tax rates of eighteen percent for basic rate taxpayers and twenty four percent for higher or additional rate taxpayers.

You can no longer deduct mortgage interest from your rental income to reduce your taxable profit. Instead, all owners receive a twenty percent tax credit on their finance costs, which reduces the rate of relief specifically for higher and additional rate taxpayers.

Furthermore, profits from holiday lets are no longer classified as relevant UK earnings, meaning you cannot use this rental income to boost your maximum personal pension contributions.

When you buy your holiday let, you also need to be aware of stamp duty. On top of the standard stamp duty land tax charge applied to primary property purchases, you will be liable for a significant surcharge because you are purchasing an additional residential property.

This surcharge adds five percent to the standard rate of every single stamp duty band, applying to all purchases over forty thousand pounds.

Because the standard zero tax threshold has returned to £125,000,  the combined starting rate for a holiday home purchase is five percent and this scales up incrementally based on the purchase price of the property.

Find out about the second property stamp duty bands.

What are the costs associated with a holiday let mortgage?

The interest rate on a holiday let mortgage will typically be higher than on a residential mortgage. There are also additional costs involved in owning and running a holiday let, and these are often more substantial than people think.

The interest rate on a holiday let mortgage will typically be higher than on a standard residential mortgage.

There are also additional costs involved in owning and running a holiday let, and these are often more substantial than people think.

You will need to pay specialist holiday let insurance, utility bills, and council tax or business rates. Holiday lets require dedicated insurance policies because standard buildings and contents insurance completely excludes paying guests.

Your policy must include public liability cover to protect against guest injury, alongside accidental and malicious damage protection.

You also need to factor in the costs of regular maintenance or professional changeover cleaning.

Because holiday properties face a constant rotation of guests, wear and tear is much higher than in a standard long term rental.

If you choose to use a holiday letting agent to handle check ins, cleaning, and marketing, their management fees can eat into your monthly profits.

Your holiday let regulatory compliance checklist

Operating a short term rental means meeting strict legal obligations to ensure guest safety and maintain a valid mortgage contract.

Failing to comply can result in severe financial penalties, the removal of your listings from booking platforms, or the cancellation of your insurance policy.

Every holiday let owner must complete and maintain the following safety and legal requirements:

• A valid holiday let mortgage agreement or formal consent to let from your lender to avoid breaching your financing terms.

• A written fire risk assessment that complies with commercial property safety orders.

• Interlinked smoke and heat alarms across every floor of the property so that if one alarm sounds they all sound.

• Thumb turn locks on all main exit doors to allow guests to escape easily without needing a key.

• A carbon monoxide detector installed in every room containing a gas boiler, gas fire, or wood burning appliance.

• An annual gas safety certificate completed by a registered engineer for properties with gas appliances.

• An electrical installation condition report completed by a qualified electrician at least once every five years.

• A fire blanket located inside the kitchen area in an accessible and clearly visible position.

• An energy performance certificate matching the current minimum efficiency standards required for marketing and letting out properties.

• A commercial waste transfer note arranged with a licensed waste collector if your property has been moved onto business rates instead of council tax.

• A valid local authority license or a unique national registration number displayed on all your public listings across booking platforms like Airbnb and Booking dot com.

What about holiday let mortgages for overseas property?

If you’re buying abroad, your approach will have to be slightly different.

Generally you will have to approach the bigger banks that have branches in the country you’ve chosen, although your mortgage broker may have access to further lending options.

One such option is to go with a local bank from the area where your target property is located. This opens you up to the fluctuations of the foreign currency exchange market, so you may see your mortgage terms and rates shift fairly frequently.

Be extra cautious when conducting any big financial transactions abroad, as even if you speak the language like a native, you may not be sufficiently familiar with all their legal quirks and tax practices.

A financial adviser based in the region will be an enormous help.

What are the best holiday let mortgage deals?

Look for a mortgage adviser who knows both the buy-to-let market and the holiday let market well.

Not only will they be able to find you the best available deal, but they may be able to give you other tips on the practical side of setting up in this business.

What are the alternatives to a holiday let mortgage?

The obvious alternative to a mortgage is a cash purchase. If you happen to have this much money available, buying a property outright is always going to be better value.

You won’t pay any loan interest or arrangement fees, and you’ll get to keep more of your rental income.

Alternatively, if you’re not letting a whole property but only a room or annex in your home, you won’t need a specialist holiday let mortgage – though you should still consult your current mortgage lender first.

Get expert financial advice

Securing a mortgage for a holiday home to let can seem complex, but understanding the unique aspects of these loans makes the process much smoother.

With requirements like higher deposits and proof of potential rental income, it’s essential to grasp these specifics, along with the related costs and tax implications.

By staying informed and carefully considering your options, you can confidently find the right mortgage that aligns with your goals for your holiday property.

Unbiased will match you with a qualified mortgage broker who can help you navigate the specifics of securing a holiday let mortgage and find the best options for your property.