Holiday let mortgages vs buy-to-let mortgages

If you’re considering investing in a rental property, it’s crucial to choose the right mortgage for your strategy. While some landlords assume a standard buy-to-let (BTL) mortgage will cover all rental types, those planning to operate a holiday let may face complications if they don’t have the correct financing in place (writes Howard Reuben, Principal, HCH Financial Services).

In rare cases, lenders may permit a holiday let property to operate under a BTL mortgage – but only with their full knowledge and consent. If the arrangement is made without disclosure, the consequences can be severe, including loan penalties, higher interest rates, or even credit damage.

So, what’s the difference between a holiday let mortgage and a BTL mortgage, and why does it matter for your property business?

What is a holiday let mortgage?

A holiday let mortgage is designed specifically for properties rented out on a short-term basis, typically to holidaymakers. These properties are often located in tourist hotspots and listed on platforms like Airbnb, Booking.com, or Vrbo.

Unlike traditional BTL mortgages, holiday let mortgages account for the seasonal nature of short-term rentals, with lenders assessing income potential differently.

Key differences between holiday let and buy-to-let mortgages

1. Income assessment

BTL: lenders evaluate rental income based on long-term tenancies (typically 6–12-month leases).

Holiday let: lenders assess peak-season earnings, as short-term rentals can generate higher (but less predictable) income.

2. Deposit requirements

BTL: usually requires a minimum 25% deposit.

Holiday let: often demands a larger deposit (25–40%) due to higher perceived risk.

3. Interest rates

BTL: typically offers slightly lower interest rates due to stable, long-term rental income.

Holiday let: may come with higher interest rates because of income fluctuations.

4. Lender eligibility criteria

BTL: available for most residential properties.

Holiday let: usually requires the property to be in a recognised tourist area with proven demand.

5. Personal use restrictions

BTL: no restrictions on owner occupancy (if not rented).

Holiday let: some lenders limit how often you can use the property personally (e.g., 60–90 days per year).

Why does the right mortgage matter?

Using the wrong mortgage type can lead to:

• Breach of mortgage terms (risk of lender penalties).

• Higher interest or forced refinancing.

• Credit score damage if the lender takes action.

If you’re running a professional holiday let business, securing the correct mortgage ensures compliance and maximises profitability.

Need expert mortgage advice?

Navigating holiday let mortgages can be complex, but HCH Financial Services specialises in helping property investors secure the best financing for their rental strategy. Get in touch with our team of expert brokers today:

Call: 0333 1234 536

Email: advice@hchfs.com