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An Airbnb mortgage, or mortgages for Airbnb, refers to the type of mortgage that complies with the rules surrounding using a property as a short-term rental on platforms such as Airbnb. Unlike traditional mortgages for primary residences where the property is used solely for personal occupancy, a mortgage for Airbnb property takes into account the property owner’s intention to generate income through short-term rentals.
When considering Airbnb hosting, the type of mortgage required depends on factors such as the property and your unique situation.
It’s important to ask yourself key questions such as:
If you are living in the property and considering renting out individual rooms through Airbnb, you might be able to use your existing residential mortgage for this purpose.
Most mortgage agreements for residential properties have clauses that require approval or restrict rental arrangements. This approval is commonly known as ‘consent to let,’ and it’s an important step you’ll likely need to take to proceed with this arrangement. Failing to get permission from your lender about the change in property usage could lead to serious consequences. Make sure to review your existing mortgage terms and reach out to your lender for guidance.
Leasehold properties
Whether you currently own or are considering buying a leasehold property, it’s essential to carefully review the rules outlined in the lease agreement. Certain residences are explicitly designated as solely for “private residence,” and if your property falls under this category, engaging in short-term rentals won’t be permissible. Leasehold arrangements are frequently associated with flats.
Regional regulations
It’s important to check if there are regional constraints to short-term lets in the area. There are certain rules and regulations in some cities and regions. More information can be found on the Airbnb website.
While buy-to-let mortgages work in similar ways to the mortgage required for Airbnb property, there are a few factors that are different. Largely, the interest rate may be slightly higher than standard buy-to-let mortgages.
It is important to note that you cannot Airbnb your property with a standard buy-to-let mortgage.
A holiday let mortgage may be more appropriate for short-term letting. It is common for individuals to take out a holiday let mortgage with a lender who is comfortable with Airbnb.
More information on holiday lets can be found here.
This is relevant if the property has a commercial aspect or if you’re an experienced landlord with multiple properties.
There is a smaller pool of lenders which would be content lending to properties used for Airbnb. Given the unique nature of short-term rentals, it is likely a specialist lender will be required, with whom we have fantastic relationships.
Airbnb mortgages and short-term rentals are a niche market area. At Private Finance, we can assist you in identifying the most appropriate lender for your specific requirements and arrange the right mortgage tailored to your circumstances.
Airbnb mortgage eligibility and affordability
To proceed with your mortgage application, you will need to gather essential documentation such as identification, proof of address, and income history. You will need to prove your potential earnings from Airbnb rentals to demonstrate your viability to lenders. Your mortgage broker will handle all the paperwork and timelines to manage the application in a stress-free manner.
Mortgage affordability is calculated differently depending on the lender. Lenders will want you to demonstrate the expected market rental income, similar to a standard buy-to-let mortgage. They could also consider the averages of high, medium, or low rental seasons. If you are on a residential mortgage, the requirements are different if you have consent to let. In this case, the lender will not need to reassess your affordability. However, they will need to reassess your affordability if you remortgage onto a new product at a later date.
Eligibility criteria for mortgages for Airbnb can vary based on the type of mortgage and property usage. Factors include whether you’re renting rooms or the entire property, property type, level of personal income, deposit size, and rental income coverage. Meeting these criteria is essential for obtaining the right mortgage for your Airbnb plans.
Insurance is a critical consideration for Airbnb properties. Standard home insurance might not cover short-term rentals, so you’ll likely need specialised coverage that accounts for potential risks associated with guests staying on your property. Airbnb strongly encourages all hosts to understand the terms of their insurance coverage and ensure this is sufficient.
