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Getting An Airbnb Mortgage: Everything You Need to Know
Since Airbnb first gained traction in the UK in 2015, it has become an increasingly lucrative way to rent property. But while the returns for this type of rental are high, securing an Airbnb mortgage isn't as straightforward as you might think.
The Airbnb market is continuing to grow throughout the UK, with coastal and city-centre properties remaining in high demand for holidaymakers and weekend city breakers.
But while some AirBnB properties are just spare rooms or annexes within a primary home, more and more people in the UK are looking for an Airbnb mortgage to purchase a property solely for short-term lets.
In this guide, we look at how much you could earn via AirBnB renting and how to secure Airbnb mortgage finance.
Most people don’t realise the range of finance now available for purchasing an Airbnb property with a mortgage – lenders are becoming more lenient, providing finance for short-term, holiday-let style properties as opposed to just AST rentals (Assured Shorthold Tenancy) that are rented for at least 6 months at a time.
Related: Spring Budget 2024: 5 Key Property Market Takeaways & 2024 Spring Budget - What it Means For SMEs
In this guide
Is it Hard to Get an Airbnb Mortgage?
What Mortgage Types Can Be Used for Airbnb?
How Much Can You Earn with an Airbnb Mortgage?
Do Airbnb Mortgages Have Limitations?
Previous Restrictions on Airbnb Mortgages
Can I Airbnb My House if I Already Have a Mortgage?
New Mortgage Products for Airbnb Portfolios
How can a mortgage broker help?
Is it Hard to Get an Airbnb Mortgage?
Airbnbs can be the most difficult rental properties to get a mortgage for. Buying a property specifically for short-term lets is a red flag to lenders due to the fluctuating income and occupancy rates associated with this type of rental.
Different mortgage lenders have varying policies regarding short-term rentals and Airbnb properties. Some lenders are more open to providing mortgages for such properties, while others may have stricter requirements or outright restrictions.
But it is certainly possible to find a lender willing to fund the purchase of a short-term let property. In fact, there are lenders that specialise in holiday let mortgages - it's just a matter of finding them.
Here are a few things that lenders may take into account if you apply for an Airbnb mortgage:
Property Location
The location of the property can impact your ability to secure an Airbnb mortgage. Lenders may be more comfortable with properties in popular tourist destinations, urban areas, or places with a high demand for short-term rentals.
Your Financial Situation
Lenders will assess your financial stability and creditworthiness when considering your mortgage application. A good credit score, a sufficient deposit, and a steady income can improve your chances of approval.
Experience and Track Record
Some lenders may prefer borrowers with experience in property management or a successful track record with Airbnb rentals. This can demonstrate your ability to manage the property and generate rental income.
Deposit
Lenders typically require a larger deposit for Airbnb mortgages than traditional rental properties. You may need to provide a 20% deposit or more.
Property Type and Condition
The type and condition of the property can also affect your eligibility. Lenders may be more willing to finance well-maintained and attractive properties that are likely to attract guests.
What Mortgage Types Can Be Used for Airbnb?
A variety of mortgage types can be used for an Airbnb. The main options are:
Standard Residential Mortgage
If your property is primarily used as your primary residence, you might already have a standard residential mortgage. However, before listing your property on Airbnb, it's crucial to review your mortgage agreement. Some residential mortgages have clauses that inhibit short-term rentals, and violating these terms could be detrimental.
Buy-to-Let Mortgage
A buy-to-let mortgage is designed for properties that will be rented out. Many property owners use buy-to-let mortgages for traditional long-term rentals, but some lenders may permit short-term rentals. Check with your lender to ensure compliance and discuss any potential restrictions.
Holiday Let Mortgage
Some lenders offer specific holiday let mortgages for properties intended for short-term holiday rentals, like those on Airbnb. These mortgages may have terms tailored to the seasonal nature of holiday rentals and may be more accommodating for short-term letting.
Commercial Mortgage
If you plan to operate the property as a business and rent it out on a short-term basis, you might consider a commercial mortgage. Commercial mortgages are typically used for properties used for business purposes, including short-term accommodations.
Remortgaging or Refinancing
If you already have a mortgage on the property, you might explore the option of remortgaging or refinancing. This involves paying off your existing mortgage with a new one that better suits your current needs, potentially allowing for short-term rentals.
Different lenders have varying policies regarding short-term rentals. Some may be more accommodating, while others may have strict restrictions. It's essential to communicate with potential lenders to get a good idea of their policies.
How Much Can You Earn with an Airbnb Mortgage?
It, of course, depends on your property type and location and the number of rooms you can rent out, but Airbnb provides a useful example calculator on their website for a few top locations.
Taking central London as an example, hosting an entire property for 4 guests could earn you up to £3,729 per month based on the local area and current demand.
A property in this location obviously won’t come cheap, but the desirable area means rental demand won’t be a worry, making your property more attractive from an investment perspective and from a mortgage lender’s viewpoint.
The reliability of regular guests will be factored in by underwriters when you apply for your AirBnB mortgage, so you should think about this when choosing your property.
The best way to estimate what kind of rental yield you’ll get from your Airbnb property is by looking at what’s already on the market in your area on the website.
You can also use this calculator to work out the rental yield you’ll get from your AirBnB.
While you’ll need to take into account that you may not be able to rent out your property for every single week of the year, you could well find that you’ll earn more with multiple short-term holiday guests than with one long-term rental contract.
Do Airbnb Mortgages Have Limitations?
Mortgage lenders also require that their consent is sought for Airbnb tenancies.
- Lenders who consider it to be using a property for commercial purposes may refuse, including Barclays, HSBC, Nationwide and Yorkshire Building Society.
- Other lenders may grant a “consent to let” – if the borrower can prove that they had no plans to let out this property when they bought it. They will usually require that a new mortgage is set up at buy-to-let rates.
New Airbnb mortgage products being introduced may provide a workaround for part-time landlord homeowners.
But, like professional landlords, they may come under pressure from neighbours in residential areas who are unhappy with short-term, party-minded tenants arriving and leaving at all hours (and clattering their wheelie luggage along the pavements).
Similar: How to Mortgage a UK Holiday Let Property if You are an Expat
Previous Restrictions on Airbnb Mortgages
Many traditional lenders have viewed Airbnb-style letting as a much riskier option than AST lets or traditional holiday lets. The primary cash flow from short-term letting may be seasonal and much less predictable than fixed rental agreements for one or two years.
As a result, lenders have only been willing to stress borrowing affordability on conventional AST returns.
Can I Airbnb My House if I Already Have a Mortgage?
If you already have a mortgage on the property you plan to let on Airbnb, you'll need to discuss this directly with your lender. Whether your mortgage lender will allow you to rent your property on Airbnb depends on their policies regarding short-term lets, your mortgage contract, and the context of how you plan to let out the property.
It's unlikely that your mortgage contract mentions Airbnb specifically, but if you plan to rent out your property in any capacity, you'll need to get permission from your lender.
If you have a residential mortgage on your property, you'll need to obtain a 'consent to let'. This is a written agreement from your lender allowing you to rent out your property on a short-term basis.
Some mortgage agreements include clauses that restrict or prohibit renting out your property for short-term stays, such as through Airbnb, while others may be more lenient.
While some lenders may be opposed to renting out your entire property for a period of time, they can be more accommodating if you plan to rent out one room of a property you already live in, as this is typically seen as a lodger-scenario instead of a holiday let.
If you already have a buy-to-let mortgage on your property, you'll need to review the terms and conditions of your mortgage agreement. Some lenders include short-term let clauses in their contracts, while others don't allow it.
In some cases, lenders may have specific policies or products designed for landlords who want to rent their properties on Airbnb.
Even if there is a clause in your mortgage contract allowing short-term rentals, it's important to communicate your plans with your lender to ensure that you are compliant with all their policies and to explore any available options. Violating your mortgage contract could have serious consequences, including potential legal actions or changes to your mortgage agreement.
It's also important to inform your insurance provider about your plans to Airbnb your property. Standard homeowners insurance may not cover certain risks associated with short-term rentals, so you may need to adjust your coverage or obtain additional insurance.
If you're unsure what your options are, it's worth talking to a specialist mortgage broker. At Clifton Private Finance, our brokers have an expert knowledge of the market and what products may be available to you.
New Mortgage Products for Airbnb Portfolios
Alternative finance providers are now stepping in to help fill the funding gap, allowing landlords to diversify their portfolios with some choice high-return properties in sought-after holiday locations.
For example, loans of up to £2M are now available from a specialist lender for the purchase or remortgage of short-term letting properties, with loan-to-value starting at 65%.
Related: How to get a Holiday Let Mortgage
Contact Clifton Private Finance
On rental properties offering this range of returns, the cost of your Airbnb mortgage will be a critical factor. We can source lending across the market, including broker-only private lenders, and find you the most cost-effective solution.
To arrange a convenient time to discuss what you need to finance a holiday rental property, call us at 0117 959 5094 or book a free consultation below.
