What is a holiday let mortgage?
A holiday let mortgage is designed for a property that will be rented out to short-term guests rather than occupied by a long-term tenant.
This is different from:
- a residential mortgage, where you live in the property;
- a standard buy-to-let mortgage, where the property is usually let on a longer-term tenancy;
- a second home mortgage, where the property is mainly for personal use.
If you plan to rent the property to holiday guests, you should not assume a normal residential or buy-to-let mortgage is suitable. The lender needs to know how the property will be used.
How lenders assess holiday let mortgages
Holiday let lenders often look at both the borrower and the property. Criteria vary, but common considerations may include:
- deposit size and loan-to-value;
- projected holiday letting income;
- personal income and financial resilience;
- location and likely demand;
- seasonality of bookings;
- property type and condition;
- whether you will use the property yourself;
- management arrangements;
- existing mortgage commitments.
Some lenders may use a letting agent’s projection or expected weekly rental income across low, mid and high seasons. Others may also require a minimum personal income.
Because criteria vary widely, it is worth checking options before making an offer.
Holiday let vs buy-to-let: why the difference matters
A standard buy-to-let usually relies on long-term rental income from tenants. A holiday let relies on shorter stays, seasonal occupancy and nightly or weekly pricing.
That creates different risks and considerations:
- income may be higher in peak months but lower in quieter periods;
- running costs may be higher due to cleaning, utilities, furnishing and platform fees;
- void periods can be less predictable;
- local rules may affect short-term letting;
- tax treatment may differ from standard residential letting.
A lender will want to understand whether the property appears viable, not just whether it is attractive.
Rules and regulations to check
Holiday letting is becoming more regulated. GOV.UK guidance for England says the government is introducing a mandatory national registration scheme for short-term lets, expected to begin in 2026. Local planning authorities decide whether planning permission is needed, based on how the property is used and its impact on neighbours and the local area.
You should also check:
- fire safety obligations;
- gas and carbon monoxide safety;
- electrical safety;
- insurance requirements;
- whether an Energy Performance Certificate is needed;
- local council rules;
- lease restrictions, if the property is leasehold.
If the property is in Scotland, Wales or Northern Ireland, the rules may differ.
Business rates and council tax
In England, GOV.UK guidance says a self-catering property may be eligible for business rates rather than council tax only if certain criteria are met. From 1 April 2023, this includes being available to let commercially for 140 nights in a 12-month period, actually let commercially for 70 nights in that period, and intended to be available commercially for at least 140 nights in the following 12 months.
If the property stops meeting the criteria, it may be moved from business rates to council tax.
This is important because running costs can change the investment case.
Furnished holiday lettings tax changes
The tax position has also changed. GOV.UK confirms the furnished holiday lettings tax regime has been abolished, with effect from April 2025 for Income Tax, Capital Gains Tax and Corporation Tax purposes. Previously, furnished holiday lets could benefit from tax treatment that differed from other property businesses.
Houz does not provide tax advice. Tax treatment depends on individual circumstances and may be subject to change in the future. You should speak to a qualified tax adviser before relying on any tax assumptions when buying a holiday let.
Is a holiday let mortgage right for you?
A holiday let may work well for the right borrower and property, but it needs careful planning. Before committing, consider:
- realistic occupancy levels;
- cleaning, maintenance and management costs;
- platform fees;
- insurance;
- tax;
- local restrictions;
- how the mortgage will be assessed;
- whether you could afford the mortgage during quieter months.
Final thoughts
Holiday lets can be a useful investment or lifestyle purchase for some buyers, but they are more complex than they first appear. The mortgage, tax, regulation and running costs all need to be considered.
If you are thinking about buying a holiday let, Houz can help you understand the mortgage options that may be available, explain lender criteria and discuss what questions to ask before you make an offer.
Important information: There may be a fee for mortgage advice. The precise amount of the fee will depend upon your circumstances but will range from £49 to £349 and this will be discussed and agreed with you at the earliest opportunity. The guidance and/or information contained within this article is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK.
Sources used: GOV.UK guidance on letting out self-catering holiday homes in England; GOV.UK business rates rules for self-catering property; GOV.UK abolition of the furnished holiday lettings tax regime; GOV.UK EPC guidance.
This guide is general information, not personal advice. Start a fact find to discuss your situation.