Airbnb Mortgages: What You Need to Know Before Investing in Short-Term Rentals

If you're considering investing in property and renting it out through Airbnb, you may be wondering whether an Airbnb mortgage is possible.

The answer is yes, but it can be more complicated than getting a standard buy-to-let mortgage. Keep on reading to find out more about these type of mortgages…..

Airbnb Mortgage

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Key Takeaways

airbnb mortgage

Getting a Mortgage for an Airbnb Property

If you are considering purchasing a property to let on Airbnb, you may need to obtain a mortgage for this specific type of rental. While it is possible to get a mortgage for an Airbnb property, not all lenders offer mortgages on this type of let – so i   t’s crucial to do your research.

You will need to present several pieces of documentation, such as bank statements, proof of income statements, credit reports and proof of address documents to your lender. They will use this information to see if you qualify and determine how much you can borrow.

Getting a mortgage for an Airbnb property may be more challenging, due to lenders’ concerns over affordability and risks associated with short-term rental properties.

When applying for an Airbnb mortgage, it’s essential to be open about your plans with the property. Some lenders have specific criteria regarding properties used as Airbnb rentals – minimum rental periods or occupancy rates could be among these requirements – which makes it essential to verify whether or not yours meets them before proceeding with an application for financing.

Overall, securing an Airbnb mortgage can be accomplished, though it may require more effort and research than with regular loans. You must locate a lender willing to offer this type of mortgage and present them with all relevant paperwork in order to ascertain your eligibility; by being upfront about your intentions and conducting proper research you may increase your odds of finding an Airbnb loan that best meets them.

Types of Mortgages for Airbnb

When planning to use your property as an Airbnb rental, a different kind of mortgage than traditional buy-to-let options should be taken into consideration. Here we explore different kinds of loans which might suit Airbnb users best.

Buy-to-Let Mortgage

A buy-to-let mortgage is the go-to choice if you plan to rent the entire property on Airbnb. Specifically designed to address this need, buy-to-let loans typically require larger deposits and have higher interest rates. However, they can be a good option if you are looking to generate a regular income from your property.

Holiday Let Mortgage

A holiday let mortgage is one of the many financial tools to consider if you plan to use your property as an Airbnb rental. Designed specifically for people renting their property as holiday accommodations, holiday let mortgages typically feature higher interest rates but offer greater flexibility regarding rental periods and rental payments.

Commercial Mortgage

A commercial mortgage is another option to consider if you plan to use your property as an Airbnb rental. These types of mortgages are tailored specifically towards those looking for properties to buy for commercial purposes, requiring larger deposits than usual and higher interest rates compared to standard residential mortgages.

Airbnb Mortgage

Eligibility Criteria for Airbnb Mortgage

If you’re interested in applying for an Airbnb mortgage, there are certain eligibility requirements you must fulfill before being approved by lenders. In this section we’ll look at which factors lenders consider before approving or disapproveing a mortgage application.

Affordability

Repayment of an Airbnb mortgage is of critical importance, with lenders wanting to ensure you can comfortably repay it even without tenants in your property for some period. Lenders use income and debt data along with any financial commitments as measures of affordability.

Credit History

One key consideration lenders take when assessing your eligibility for an Airbnb mortgage is your credit history. Lenders want to see evidence of timely debt payments as well as your credit score which provides a numerical representation of your creditworthiness.

Property Type

Your Airbnb mortgage eligibility will also depend on the property type that you’re planning on buying with an Airbnb loan. Some lenders have restrictions regarding which types of properties they will lend against; such as only lending against residential or properties located in specific locations. In addition, certain lenders require minimum standards be met such as having certain numbers of bedrooms or bathrooms in a property.

Airbnb Property Types and Rental Options

Before taking the leap with an Airbnb mortgage loan, it is crucial that you understand all of the available properties and rental options on their platform. Here are three of the main types:

Whole House

Whole house rentals on Airbnb offer exactly what their name suggests – an entire property to guests for rent. This service can be particularly advantageous for hosts with multiple properties or who plan on being away for extended periods and want an additional source of income while they are gone. Likewise, whole house rentals provide plenty of privacy for families or groups of friends travelling together and need their own space while on the road.

Single Room

If you have an extra room in your home, renting it out on Airbnb as a single room rental could be an ideal way to earn extra income without renting out all of it. Single room rentals also appeal to travellers looking for budget-friendly solutions or those wanting to meet new people.

Lodger

Rental on Airbnb involves subletting a room of your home to long-term tenants as a source of steady income, or as an affordable alternative to renting their own apartment. Lodger rentals have proven popular among hosts looking to secure additional sources of revenue and tenants looking for more flexible living arrangements than their own place can provide.

Before settling on an Airbnb rental type, it’s essential to carefully assess both your own needs and those of potential guests. Each rental has its own set of benefits and drawbacks; before making a final decision.

Financial Implications of Airbnb Mortgages

Before applying for an Airbnb mortgage, it’s essential to fully comprehend its financial implications. Here are a few key points you should keep in mind.

Tax Deductions

One of the many advantages of an Airbnb mortgage is being able to deduct certain expenses from your taxes. For example, cleaning services, repairs and maintenance expenses could all qualify, as could mortgage interest and property taxes; it’s wise to seek advice from a tax professional so as to take full advantage of any available deductions.

Mortgage Interest

When taking out an Airbnb mortgage, the interest rate is likely to be higher than it would be with traditional rental properties due to lenders considering Airbnb properties a greater risk than regular rentals. However, you may be eligible to deduct part of your mortgage interest on your taxes, helping offset some of this added cost.

Early Repayment Charges

If you choose to repay your Airbnb mortgage early, early repayment charges could become applicable. Since these can be significant expenses, it’s essential that these are taken into consideration when considering whether to get one. Some lenders may even require you to pay penalties if selling within a set time period.

The Airbnb Market in the UK

If you are considering renting out your property on Airbnb, it is crucial to understand its market. According to Hostaway, the top 10 UK Airbnb markets for investing are Bradford, Swansea, Stoke, Plymouth, Belfast Birmingham Manchester Glasgow Liverpool Edinburgh

Before diving headfirst into Airbnb, it’s important to remember that not all mortgages permit short-term letting. According to Virgin Money UK, any violation of their mortgage terms and conditions by short-term renting out would constitute a breach of agreement; as a result it’s imperative you secure the appropriate type of loan; one with standard buy-to-let (BTL) terms might not be your only solution.

Notably, the UK government has recently implemented regulations for short-term vacation rentals. In 2015, the Deregulation Act came into force allowing homeowners to rent out their properties for up to 90 days per year without planning permission; for any more than that amount of time you will require approval from your local council.

Beyond regulations, it is also crucial to keep an eye on competition in the Airbnb market. According to Online Mortgage Advisor, Airbnb listings in the UK have increased by 33% year-on-year since 2018. Therefore, your property needs to stand out by offering unique and high-quality experiences for your guests.

Overall, Airbnb can be a fantastic way to generate additional income on the side. But before diving in headfirst it’s essential that you conduct sufficient research and ensure you have access to an appropriate mortgage product and adhere to UK government regulations.

FAQ’s

Answers to your most common questions.

If you plan to use your property for Airbnb purposes, a buy-to-let mortgage will be required since a standard residential mortgage does not allow short-term rentals. To qualify for such an arrangement, certain requirements such as having good credit, stable income and an initial deposit equaling 25% of its total value must be fulfilled.

Ultimately, finding the ideal mortgage option depends on your own individual circumstances and financial goals. Some lenders provide specific mortgages tailored specifically for Airbnb properties while others may permit use of standard buy-to-let mortgages – it is wise to compare various loan offers and rates before choosing one that meets all of them!

The 90-Day Rule is a legal requirement in certain areas that sets limits on how often short-term rentals of properties such as Airbnb can occur during any 12-month period. If you plan to rent out your property for longer than 90 days per year on Airbnb, planning permission or change of use permits from your local council may be required as well as lender restrictions on how often an Airbnb listing can be advertised for rental.

No, legally renting out your property with Airbnb if it has a residential mortgage is illegal. A residential mortgage is designed for owner-occupied properties only and does not permit short-term renting out. If caught renting your property without permission on Airbnb without first notifying the lender, fines could result.

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