Do You Need a Buy-to-Let Mortgage for Airbnb?

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Do You Need a Buy-to-Let Mortgage for Airbnb?

Do You Need a Buy-to-Let Mortgage for Airbnb?

Chris Needham explains what type of mortgage you need if you want to let out a property on Airbnb.

Do you need a Buy to Let mortgage or a holiday let mortgage on an Airbnb property?

This is all to do with the terms and conditions of a mortgage. If you buy a property that you’re going to rent out on a long-term basis, with tenants moving in for six months or more with an assured tenancy agreement in place, you would definitely need a Buy to Let mortgage.

If you’re buying a property to rent out on Airbnb, for holiday makers to come and stay for a weekend or midweek stay of two or three days, you would definitely need a holiday let mortgage.

The difference is in the way that lenders assess the risk. If a tenant’s moving in for six months, the lender knows that you’ve got income coming in for that time. If you’re looking to rent out the property on an Airbnb basis, there are more transactions and a lot more risk over whether you will generate the income you want.

Is it hard to get a holiday let mortgage on an Airbnb?

For traditional holiday let properties, most lenders want to understand the income the property will generate, to assess whether the mortgage will be valid or not. So they need a way of testing how much that property is likely to generate in let income.

What they usually do is ask you to get a letter from a holiday lettings company. They will come and visit the property and work out how much they think it can generate in the low season, mid-season and high season.

If you’re planning on putting it on Airbnb, the approach will be different. The lenders have different ways of assessing that future income. It is a little bit harder if you’re buying a property to Airbnb it, rather than use a holiday lettings company.

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At BR Needham, our qualified advisers do the hard work for you and help you make those important property purchasing decisions – whatever type of mortgage you’re looking at.

Do I need a holiday let mortgage to list my property on Airbnb?

It would certainly need to be on an appropriate mortgage, where you weren’t breaching the conditions.

Imagine I had a residential mortgage on the property I live in, and decided to go travelling for six months and put my property on Airbnb for those six months. That would be breaching the conditions of my residential mortgage.

Certainly before you put the property on Airbnb, you’d need to make sure that you weren’t breaching any conditions on your mortgage, and potentially remortgage if not.

Can you Airbnb without a holiday let mortgage?

The answer is no, you’d need to be on the right mortgage before you can let your property out through Airbnb. It would need to be on a holiday let mortgage from the start.

Certain lenders might do it on a Buy to Let mortgage as long as they know in advance that you are planning to Airbnb it.

How can I get a holiday let mortgage for my Airbnb? What are the eligibility criteria?

Speak to a mortgage broker right at the start of this process. If you are going to buy a holiday let property, that’s already a specialist mortgage. If you’re then going to use Airbnb to generate income and attract holiday makers, that makes it more specialist still.

A mortgage broker will make sure you understand the rates you’re going to attract from lenders that offer a mortgage on this basis.

The key criteria are that you will need at least a 25% deposit – so 25% of the value of the property. The property would also need to meet the lender’s income assessment – how much you’re likely to generate from the property against the mortgage amount you’re looking for.

They will also want to have a look at the property to understand that it can generate enough holidaymakers to make the lending work. Speak to a mortgage broker at the start as we know which lenders lend in these situations and we can help to explain that criteria to you.

Can I get a holiday let mortgage for an Airbnb with bad credit?

It just depends on the nature of your credit score. As we’ve said on the bad credit podcasts we’ve done, if you’ve just had a single missed payment, that is usually okay with most lenders.

However, if you are behind on numerous payments, lenders wouldn’t accept that. They would say you need to get up-to-date with your current commitments before they would lend.

It’s best to review it on a case-by-case basis. It depends how low your credit score is and the issues that are dragging it down. If you’ve got a default or a County Court Judgement, it’s important to understand the size of those debts, how long ago they were and whether they are now satisfied.

If they’re all satisfied and they were three or four years ago, it’s a lot easier for us to find a lender than if they are more recent and still outstanding.

What else do we need to know about mortgages for Airbnb?

Airbnb is very popular because people can put a property online, manage it themselves and Airbnb just take a cut. Just make sure that you’re on the right mortgage, so you’re not breaching the terms and conditions of your existing deal.

If you don’t know which lenders to use or how to arrange the mortgage, we can help you right from the start of the process.

Your property may be repossessed if you do not keep up repayments on your mortgage.

The Financial Conduct Authority does not regulate some forms of Buy to Let Mortgage.