How to Mortgage an Airbnb Property

Airbnb has revolutionised the holiday let sector over the last few years; diversifying the types of properties available to holidaymakers and opening up new income streams for property owners. Head of Commercial and holiday let finance expert, Andy Elley, gives a concise overview of the property finance options available, so you too can benefit from this £3.5 billion industry.

The current stamp duty holiday has encouraged many people to invest in second-homes, and make the most of the savings it offers. Furthermore, the UK holiday sector has seen a significant increase in bookings, which is predicted to last for at least the next few years, due to international travel restrictions and general reluctance to travel abroad during the pandemic. We’ve seen a noticeable increase in holiday let finance enquiries, with many looking to list their properties on Airbnb.

Starting your Airbnb business might seem as simple as just signing up and listing your property on the site (which is a straightforward process). However, unless your property is unencumbered or you’re able to purchase it for cash, it’s essential to consider the type of mortgage you’ll need, as it’s not a case of ‘any mortgage will do!’  

Deciding on the type of host you’re going to be will determine the kind of mortgage available to you. Are you:  

  • letting out a room or two in your existing home?  
  • letting out an entire property?  

Letting out a room in your existing home on Airbnb 
The first thing you need to do is check with your mortgage provider. Generally, you will need permission from your residential lender to let out a room in your property, whether with Airbnb or for a lodger. While they may allow it, you will likely need to seek “consent to let” to avoid being in breach of your existing mortgage contract. The same applies whether you’re letting a room long term or just on an ad-hoc basis to provide an extra bit of income. If your lender doesn’t allow for this, you could consider remortgaging; in which case, a broker will be able to guide you towards a more suitable lender.  

Letting out an entire property on Airbnb  
If you’re letting out an entire property on Airbnb, a residential mortgage is unlikely to be a suitable option, as these are not designed for properties you make money from. 

Sometimes, people only want to list their home for a few weeks a year while they’re on holiday or away for work. Just as if you’re renting out a single room, you’ll need to speak to your existing residential lender to see if this is permissible. There can be severe consequences if your lender finds out you’re letting your property without permission! 

More likely, you’re wanting to use an Airbnb property to generate an income by letting it out for the majority of the year. Due to the high turnover of tenants in most Airbnb properties, the majority of buy to let lenders consider them at increased risk of void periods and do not include them in criteria. Therefore, a specific holiday let mortgage is the most suitable property finance option, as these are designed to accommodate short-term lets. If you’d like to know how lenders calculate affordability on holiday let mortgages, you can read my explanation in my recent blog Holiday Lets: Why You Should Invest Now.  

A few years ago, it was quite tricky to find a mortgage that specifically allowed for Airbnb properties; however, as the industry has grown (now with over 223,200 listings in the UK alone), lenders have opened up criteria to accommodate this market. As the property market continues to pick up after lockdown, we’re seeing an increasing number of lenders add holiday let mortgages to their offering which is a positive step for the UK holiday home market.  

If you’d like to know more about the property finance options available to make your Airbnb plans a reality, please do not hesitate to contact me, Andy Elley, on 01732 471644 or email andye@mortgagesforbusiness.co.uk.  

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NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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