What is a holiday let mortgage? Rules, tax and criteria

A holiday let mortgage is a mortgage on a property that is let to paying guests for short stays, usually a week or less at a time, rather than to a tenant on a longer tenancy. Lenders assess it on expected income across the holiday seasons, and most allow the owner some personal use each year.

Holiday let mortgages are usually unregulated, because the property is let as a business rather than lived in by the borrower or a relative. Where the owner uses the property heavily, a lender may treat it as a second home instead. The type of mortgage depends on how the property will be used.

Holiday homes can be cottages, flats, lodges on their own land or larger houses, and lenders have rules on the type, location and condition they accept.

Holiday let mortgage criteria usually cover the deposit, the borrower's income, the projected letting income, the property and the location. Many lenders ask for a minimum personal income alongside the rental figures, and some want the borrower to own a home already. First-time buyers and first-time landlords can find fewer lenders, but some do accept them.

Lenders check that the property is suitable for letting to guests, which includes furniture, safety certificates and access. Restricted occupancy properties, where planning limits who can live there or for how long, can be harder to finance and are accepted only by some lenders.

A wider look at how holiday let lending works, including lender types and broker support, is in the holiday let mortgages section. It suits anyone comparing a first holiday home with other ways of investing.

Holiday let mortgages usually need a larger deposit than residential mortgages, and many lenders ask for at least a quarter of the property price, with some accepting less on strong cases. The deposit needed depends on the projected income, the borrower's other income and the lender's view of the location and the type of property.

Stamp duty, legal fees, the valuation, furnishing and setting up the property for guests add to the money needed at the start. Higher rates of stamp duty usually apply because a holiday let is an additional property.

Some buyers release equity from their main home to fund the deposit. That changes the borrowing on the main home, so both mortgages need to be affordable together.

Lenders assess holiday let income using projected weekly rates for the low, mid and high seasons, provided by a letting agent or valuer. They average these over the year, allow for weeks the property is empty and test that the income covers the mortgage interest at a stressed rate by a set margin, known as interest cover.

Some lenders also use the borrower's personal income to support the loan, which helps where projected letting income is modest. Others rely only on the property's income. Existing holiday lets with a track record of bookings may be assessed on actual figures from accounts or booking reports.

How the rate, term and fees combine is explained on the holiday let mortgage rates page. That is useful when comparing interest-only and repayment options on the same property.

The furnished holiday let tax regime ended from 6 April 2025 for income tax and from 1 April 2025 for corporation tax. Before then, qualifying holiday lets had full mortgage interest relief and capital allowances. Since the change, holiday lets are taxed in the same way as other residential lettings (GOV.UK, accessed 20 Oct 2026).

For individual owners this means mortgage interest is no longer deducted in full from letting income. Instead, a basic rate tax credit is given on finance costs, as with other residential landlords. Capital gains tax reliefs that applied to furnished holiday lets also ended, subject to transitional rules.

Some owners now hold holiday lets through limited companies, where finance costs can be deducted from profits. The right structure depends on the owner's wider tax position, and an accountant can explain the effect on a specific case.

A holiday let earns income from short stays at seasonal rates, while a buy-to-let earns rent from a tenant on a longer tenancy. Holiday lets can earn more in strong locations but have higher running costs, more management and income that changes with the season. Buy-to-let income is steadier, but rents are usually lower than peak holiday rates.

Mortgages differ too. Buy-to-let mortgages usually need an assured shorthold tenancy and do not allow short lets, while holiday let mortgages allow guests and some personal use. Lenders for each are not always the same. A guide to longer-term letting is in the buy-to-let mortgages section.

Council tax or business rates, cleaning, booking fees and furnishings all affect the comparison. Running a holiday let is closer to running a small business than to being a landlord.