Holiday Let Mortgages Explained

This guide explains how holiday let mortgages work, what lenders require and how the abolition of the furnished holiday let tax regime from April 2025 has changed the financial landscape for holiday let owners. Whether you are buying a holiday let for the first time or remortgaging an existing one, understanding the mortgage criteria, deposit requirements and how holiday let lending differs from standard buy-to-let is essential before committing.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

For a free initial consultation about holiday let mortgage options, call 01202 155992 or contact Mortgage One.

What Is a Holiday Let Mortgage

A holiday let mortgage is a specialist product designed for properties that will be let on a short-term basis to holidaymakers rather than to long-term tenants under an assured shorthold tenancy. The property is typically let for periods of a few days to a few weeks at a time, rather than on a six or twelve-month tenancy agreement.

Holiday let mortgages are distinct from both standard buy-to-let mortgages and second home mortgages. A buy-to-let mortgage is designed for properties let to residential tenants on longer-term agreements. A second home mortgage is for a property you use personally and do not let commercially. If you intend to let the property to short-term guests for income, most lenders will require a holiday let mortgage specifically. Mortgage One’s buy-to-let mortgage guide explains the criteria differences between standard BTL and holiday let products.

Holiday let mortgages are not regulated by the Financial Conduct Authority. This means the protections that apply to regulated residential mortgage lending do not apply in the same way.

How Lenders Assess Holiday Let Applications

Lenders assess holiday let mortgage applications differently from standard buy-to-let. Because rental income from holiday lets fluctuates seasonally, lenders typically base their affordability calculations on projected income across low, mid and high seasons rather than a single annual rental figure. Many lenders commission a holiday let income projection from a specialist valuer or lettings agency as part of the application.

In addition to projected rental income, most lenders require proof of personal income, typically a minimum of £25,000 to £40,000 per year depending on the lender. This personal income requirement exists because holiday let income is less predictable than long-term rental income, and the lender wants assurance that mortgage payments can be maintained during periods of low occupancy.

The projected rental income must usually cover the mortgage interest payment by a margin, typically 125 to 145 per cent at a stressed interest rate. The exact coverage requirement and stress rate vary by lender and may differ from standard buy-to-let stress tests.

Deposit and Loan-to-Value Requirements

Holiday let mortgages generally require a larger deposit than standard buy-to-let products. Most lenders require a minimum deposit of 25 per cent, giving a maximum loan-to-value of 75 per cent. Some lenders require 30 or even 40 per cent deposits, particularly for properties in remote locations, non-standard construction or areas with limited resale markets.

The higher deposit requirement reflects the additional risk that lenders associate with holiday lets: seasonal income variability, the potential for extended void periods and the fact that holiday let properties may be harder to sell quickly if the lender needs to recover its security.

To find out what deposit and income requirements apply to the holiday let you are considering, call 01202 155992 or contact Mortgage One.

The Furnished Holiday Let Tax Changes

The furnished holiday let tax regime was abolished from 6 April 2025 for income tax and capital gains tax purposes, and from 1 April 2025 for corporation tax. This removed several tax advantages that had previously made holiday lets more favourable than standard residential lettings from a tax perspective.

Before abolition, qualifying furnished holiday lets were treated as a trade for certain tax purposes, which allowed owners to deduct full mortgage interest from rental income, claim capital allowances on fixtures and furnishings, access Business Asset Disposal Relief on sale and count FHL profits as relevant earnings for pension contributions. From April 2025, these benefits no longer apply. Holiday lets are now taxed under the same rules as standard residential rental properties.

This change does not affect the mortgage itself, but it does affect the overall financial return from a holiday let investment. Owners who previously benefited from full mortgage interest deduction now receive a 20 per cent tax credit instead, which increases the tax liability for higher and additional rate taxpayers. Mortgage One does not provide tax or investment advice. If you own or are considering purchasing a holiday let, you should speak to a qualified accountant about how these changes affect your individual tax position.

Property and Eligibility Criteria

Holiday let lenders apply specific criteria to both the borrower and the property. Common requirements include:

•       You must already own a residential property. Most holiday let lenders do not accept first-time buyers.

•       The property cannot be your main residence. It must be a separate property used primarily for short-term holiday letting.

•       The property must be suitable for holiday letting. Lenders may be cautious about properties in very remote locations, non-standard construction, thatched roofs or properties that would be difficult to resell.

•       Some lenders restrict lending in certain geographical areas. Properties on islands, in the Scottish Highlands or in areas with very limited demand may have a smaller lender pool.

•       Maximum loan amounts vary by lender, typically ranging from £400,000 to £1.5 million depending on the property, location and borrower profile.

If the property is part of a wider portfolio, some lenders will assess it alongside your other rental properties. Mortgage One’s portfolio landlord guide explains how lenders handle holiday lets within a mixed portfolio.

Holiday Lets Versus Second Homes

If you plan to use the property primarily for your own holidays rather than letting it commercially, a second home mortgage may be more appropriate than a holiday let mortgage. The key distinction is whether the property will generate rental income as its primary purpose.

Some lenders allow a degree of personal use alongside commercial letting, but the balance matters. If the lender expects the property to be available for holiday letting for a significant proportion of the year, personal use must be limited. The specific rules vary by lender. Mortgage One’s second home mortgage guide explains the criteria for properties used primarily for personal occupation.

Holiday Lets in Scotland

Scotland presents a smaller market for holiday let mortgages, with fewer lenders accepting Scottish properties. Lending criteria can be stricter, particularly for properties in remote areas. In addition, Scotland introduced a licensing scheme for short-term lets, which requires operators to obtain a licence from their local authority. Compliance with the licensing requirements is a condition that some lenders check before approving a holiday let mortgage on a Scottish property.

How Mortgage One Can Help

Holiday let mortgages are a specialist product offered by a relatively small number of lenders, many of which are only accessible through a broker. As a whole of market mortgage broker, Mortgage One can search across these lenders to identify which ones accept the property type, location and borrower profile involved in your case.

This includes assessing projected rental income against each lender’s stress test, comparing deposit requirements and identifying whether any lender restrictions apply to the specific property or area. If the holiday let is part of a wider portfolio or you are considering a limited company structure, Mortgage One can advise on how that affects lender choice. Mortgage One’s limited company buy-to-let guide explains the structuring considerations.

Mortgage One’s mortgage application guide covers the documentation and process involved in applying for a mortgage.

Figures as of April 2026, London time.

For expert guidance on holiday let mortgages, call 01202 155992 or contact Mortgage One.

The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. If you’d like to understand what these moves could mean for you, speak to Mortgage One. We can explain your options and timings based on your specific circumstances.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

FAQs

1. What is a holiday let mortgage?

A holiday let mortgage is a specialist product for properties let on a short-term basis to holidaymakers. It differs from a standard buy-to-let mortgage, which is designed for properties let to long-term tenants under an assured shorthold tenancy.

2. How much deposit do I need for a holiday let mortgage?

Most lenders require a minimum deposit of 25 per cent, giving a maximum loan-to-value of 75 per cent. Some lenders require 30 to 40 per cent depending on the property type, location and borrower profile.

3. Can first-time buyers get a holiday let mortgage?

In most cases, no. Most holiday let lenders require you to already own a residential property before they will consider a holiday let application.

4. How is rental income assessed for a holiday let?

Lenders typically use a projected income figure based on low, mid and high season estimates, often obtained from a specialist valuer or lettings agent. The projected income must usually cover the mortgage interest payment by 125 to 145 per cent at a stressed rate.

5. Do I need personal income as well as rental income?

Yes. Most lenders require a minimum personal income of £25,000 to £40,000 per year alongside the projected rental income to ensure mortgage payments can be maintained during low-occupancy periods.

6. Has the tax treatment of holiday lets changed?

Yes. The furnished holiday let tax regime was abolished from April 2025. Holiday lets are now taxed under the same rules as standard residential rental properties. You should speak to a qualified accountant about how this affects your individual position.

7. Are holiday let mortgages regulated?

No. Holiday let mortgages are not regulated by the Financial Conduct Authority. This means the protections that apply to regulated residential mortgage lending do not apply in the same way.

8. Can I use the property myself as well as letting it?

Some lenders allow a degree of personal use alongside commercial letting, but the property’s primary purpose must be short-term holiday letting. The specific rules on personal use vary by lender.