Airbnb Mortgages

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Airbnb Mortgages

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Airbnb Mortgages

Date

  • February 17, 2025

Category

Property Finance

Author

Seren Norton

Airbnb Mortgages

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  • Up to 80% Loan to Value (LTV)

  • Residential and Commercial options

  • No experience required

Whether you’re just starting out as an Airbnb host or you’re looking to expand your portfolio, understanding the right mortgage products is key to maximising your investment. This page is designed to provide Airbnb operators with comprehensive lending solutions tailored to the unique needs of short-term rental properties.

Navigating Airbnb mortgage products are usual available with specialist buy to let lenders. We’ll break down the essentials, from the specific criteria required by lenders to the best practices for securing a mortgage that aligns with your business goals. Learn about the various mortgage options available, how to effectively manage your financing, and tips to enhance your eligibility for the most competitive terms

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Do I Need a Buy-to-Let Mortgage for Airbnb?

When considering renting out your property on Airbnb, whether you need a buy-to-let mortgage can depend on how you plan to use the property. Here’s what you need to know:

Renting Part of Your Property

If you are considering renting out just a part of your primary residence on Airbnb, such as a room or a guest house, while you continue to live in the home, you generally do not need a buy-to-let mortgage for Airbnb. In such cases, your standard residential mortgage may suffice, if the terms of your mortgage agreement permit such an arrangement. It’s essential to check with your lender to confirm that occasional rentals are allowed under your current mortgage terms.

Lenders That Allow Airbnb Rentals

Several lenders are more accommodating of homeowners who wish to rent out parts of their property on platforms like Airbnb without transitioning to a buy-to-let mortgage. Notable among these are:

  • Barclays: Allows homeowners to rent out their property or parts of it on a short-term basis under certain conditions without necessarily switching to a buy-to-let mortgage.
  • Principality Building Society: Offers flexibility for part-time Airbnb rentals, allowing homeowners to make use of their property’s earning potential without a full mortgage switch.
  • Metro Bank: Provides options for homeowners to engage in Airbnb hosting, recognising the growing popularity of the platform and the potential income it represents.

Full Property Rentals

If you plan to rent out your entire property on Airbnb, especially if it will be rented out most of the time, you will likely need a buy-to-let mortgage. Buy-to-let mortgages are designed for properties that are fully intended as rental investments and come with terms and conditions suited to rental activities, including coverage for the higher risks associated with tenant turnover and rental income dependency.

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What is an Airbnb mortgage?

An Airbnb mortgage refers to a mortgage product specifically tailored for property owners who intend to rent out their property or a portion of it through Airbnb. Unlike traditional mortgages, an Airbnb mortgage considers the potential income generated from short-term rentals as part of the affordability assessment. This can be particularly advantageous for borrowers whose rental income plays a significant role in their financial profile.

What makes Airbnb mortgages distinct:

  1. Income Consideration: Lenders may allow borrowers to use projected or actual Airbnb income towards affordability rather than the AST income. This can help increase the borrowing amount compared to traditional lending assessments based solely on personal income or long-term rental agreements.
  2. Product Variety: These mortgages might come in various forms, such as buy-to-let mortgages (in regions where these are available) that are adapted for short-term rental activity. There could also be specific products designed for refinancing purposes or purchasing new properties with the intention to rent them out via Airbnb.
  3. Eligibility and Terms: The eligibility criteria for an Airbnb mortgage might include a review of the property’s location, its rental history, and the borrower’s overall creditworthiness. The terms of the mortgage—such as interest rates, down payment requirements, and loan duration—can vary based on how extensively the property will be used for Airbnb hosting.
  4. Regulatory Compliance: It’s also important for borrowers to ensure their Airbnb operation complies with local laws and regulations concerning short-term rentals, as this can impact mortgage approval during underwriting.

Airbnb mortgages are designed to accommodate the unique dynamics of hosting on Airbnb, providing a more flexible approach to property investment financing for hosts.

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How much can I borrow on an Airbnb mortgage?

When determining how much you can borrow on an Airbnb mortgage, the loan amount varies based on the lender’s criteria and the type of mortgage:

Standard Buy-to-Let Mortgages

  • Loan-to-Value (LTV): Up to 80%.
  • Income Assessment: Based on Assured Shorthold Tenancy (AST) rental figures.

Specialist Buy-to-Let Mortgages

  • LTV: Up to 75%.
  • Income Assessment: Based on actual or projected Airbnb income, considering low, medium, and high scenarios.

Commercial Mortgages

  • LTV: Typically up to 75%.
  • Income Assessment: Stressed against the actual Airbnb trading income.

Standard buy-to-let offers higher LTV but may underrepresent Airbnb’s earning potential. Specialist and commercial options, while featuring lower LTVs, may better reflect Airbnb income, potentially allowing for greater borrowing based on these projections.

Buy-to-Let Mortgage Options for Airbnb Properties

When investing in properties intended for Airbnb use, buy-to-let (BTL) mortgages are a common financing route. However, navigating these options can be complex, especially when it comes to meeting affordability assessments based on rental income projections. Let’s explore the tier-one lenders and the circumstances under which a borrower might need to consider more specialist lending solutions.

Standard Buy-to-Let Airbnb Mortgages

Tier-one lenders typically provide standard buy-to-let mortgages where the loan’s affordability is assessed against the market’s Assured Shorthold Tenancy (AST) rental figure. This is the expected monthly rent if the property were rented out on a long-term basis, rather than short-term as with Airbnb. For properties in areas with reasonable rental yields, small Airbnb units can often meet these criteria. The interest rates for such standard buy-to-let mortgages are generally more favourable, around 5.5%.

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Specialist Buy-to-Let Airbnb Mortgages

However, situations arise where the standard buy-to-let model doesn’t stack up – especially in high-tourist areas where AST figures do not reflect the higher potential income from short-term rentals. Specialist buy-to-let lenders often cater to this niche by considering Airbnb’s variable income streams. These lenders might stress the loan against the pay rate for a 5-year product, allowing for more flexibility in terms of rental income variability. The interest rates for these mortgages are typically slightly higher due to the increased perceived risk, averaging around 6.19%.

Example Scenario:

Consider a property in a tourist-heavy area where the standard AST rental figure is significantly lower than what could be earned through Airbnb. If the property’s AST-based income doesn’t cover the mortgage payments under standard buy-to-let terms, the borrower may struggle to get financing. In such cases, a specialist buy-to-let mortgage that assesses affordability based on a mix of low, medium, and high Airbnb rental figures would be more suitable.

Commercial Mortgages for Airbnb

For properties that are primarily used as Airbnb units and do not fit into the traditional or specialist buy-to-let categories, Airbnb commercial mortgages might be appropriate. These mortgages consider Airbnb income with even greater flexibility and are typically used for properties operated more like a business than a standard rental. The rates for commercial mortgages are higher, reflecting the increased risk and management involvement, typically around 6.89%.

For Airbnb hosts looking to finance their property investments, it’s crucial to understand the different mortgage options available and choose one that aligns with the income potential and risk profile of the property. While standard buy-to-let mortgages offer lower rates, they may not always capture the full income potential of Airbnb properties, making specialist buy-to-let or commercial mortgages viable alternatives for maximising investment returns.

Certain Airbnb rental scenarios are more suited to commercial mortgage products, especially when the operation scales to a more business-like approach. This includes properties that have established trading accounts for over a year, which may qualify for a going concern valuation, or market value 1 (MV1). This type of valuation considers the property as a business entity, evaluating its potential to generate income beyond the standard residential use.

Key Points:

  • Going Concern Valuation: Properties with at least one year of trading accounts can be assessed as ongoing businesses. This approach considers the full income-generating potential of the property, making it a viable candidate for commercial lending.
  • Property Class: Interestingly, for a going concern valuation, the property does not necessarily need to be in the C1 use class (hotels, guesthouses, and bed and breakfast accommodations). It can be classified as C3 (residential dwellings) or simply residential. This flexibility allows property owners who operate Airbnb rentals within their residential properties to potentially qualify for commercial mortgages based on their business’s financial performance.
  • C1 Class and Airbnb: Properties categorised under the C1 class, such as apart-hotels, are also generally well-received by commercial lenders when used for Airbnb purposes. These properties are typically designed to accommodate short-term guests, making them an ideal fit for Airbnb operations. The transition to Airbnb for such properties is usually straightforward and not considered problematic by commercial lenders.

Airbnb mortgage experience not required

Newcomers to the Airbnb market are not necessarily precluded from obtaining a mortgage. Many lenders offer products designed for first-time Airbnb hosts. These products are typically structured to help new entrants get started, albeit often with more conservative terms. For example, they might come with lower Loan-to-Value (LTV) ratios and slightly higher interest rates to offset the perceived risk associated with inexperienced operators.

Benefits of Experience

For borrowers with a track record of managing Airbnb properties, the mortgage landscape looks considerably different:

  • Access to More Products: Experienced Airbnb hosts can access a wider array of mortgage products. Lenders view experienced borrowers as lower risk due to their proven ability to generate and manage rental income effectively.
  • Better Rates: With experience, borrowers often qualify for more competitive interest rates. Their proven success and reliability can translate into cost savings on borrowings.
  • Higher LTV Options: More experienced operators may have access to higher LTV products, allowing them to leverage more significant amounts of financing relative to the property’s value. This can be crucial for expanding operations or optimising capital structure.

While novice Airbnb hosts can certainly find mortgage products to suit their initial needs, experienced hosts benefit from enhanced options that reflect their established ability to manage property rentals effectively. This differentiation in the market underscores the value of building a track record in the Airbnb business, positioning borrowers to take advantage of better financial terms and grow their property portfolios more aggressively.

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Airbnb Mortgage Frequently Asked Questions

What is an Airbnb mortgage?

An Airbnb mortgage is designed for property owners who rent out their property on Airbnb, considering potential rental income for loan eligibility.

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How do Airbnb and mortgages work together?

Airbnb income can be considered by some lenders when assessing your mortgage application, allowing you to potentially borrow more based on expected rental income.

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Do you need a buy to let mortgage for Airbnb?

Typically, properties rented out on Airbnb require a buy-to-let mortgage because of the rental income aspect.

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Can you Airbnb with a mortgage?

Yes, but you must ensure that your existing mortgage agreement does not prohibit short-term rentals.

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What is an Airbnb buy to let mortgage?

An Airbnb buy to let mortgage is designed for investors who wish to rent their property on a short-term basis through platforms like Airbnb.

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Do I need a buy to let mortgage to Airbnb?

Yes, a buy-to-let mortgage is necessary for most cases where the property will be used for Airbnb to comply with lender requirements.

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Which mortgage providers are considered Airbnb friendly mortgages?

Specialist lenders offer Airbnb friendly mortgages that recognise Airbnb income. These are lenders like CHL and FHL.

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Can Airbnb income influence mortgage interest deduction claims?

Yes, if you use your property for Airbnb, part of your mortgage interest could be deductible against your rental income for tax purposes.

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What are typical Airbnb mortgage rates?

Airbnb mortgage rates vary by lender but may be slightly higher than conventional mortgages due to the perceived higher risk of short-term rentals.

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Do commercial mortgages for Airbnb differ from residential Airbnb mortgages?

Yes, commercial mortgages for Airbnb are geared towards properties primarily used as short-term rental businesses and might have different terms and eligibility criteria compared to residential Airbnb mortgages.

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Is a NatWest Airbnb mortgage available?

NatWest residential or buy to let, does not provide mortgage products suitable for properties used exclusively for Airbnb. Their lending criteria do not cover short-term rental arrangements under typical residential or buy-to-let mortgages. We can help explore alternative lenders who specialise in accommodating the unique needs of Airbnb properties. You can get a NatWest Airbnb mortgage with NatWest commercial which could be suitable for borrowers that have a consistent set up looking for a serviced accommodation mortgage.

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Do mortgage lenders allow Airbnb?

Mortgage lenders have differing policies when it comes to allowing properties financed with their loans to be used for Airbnb or other short-term rental platforms. The key factors influencing their decisions often include the type of mortgage, the investor’s qualifications, and specific lender guidelines.

  1. Residential Mortgages: Most traditional residential mortgage lenders have restrictions against using the mortgaged property for commercial purposes, which includes short-term rentals like Airbnb. Doing so without permission may be considered a breach of the mortgage terms.
  2. Buy-to-Let Mortgages: These are more likely to allow for short-term rentals. However, landlords may need to check if they require a specific buy-to-let mortgage that permits short-term lets, as standard buy-to-let agreements typically assume longer-term tenancies.
  3. Specialist Products: Some lenders offer mortgage products specifically designed for properties being rented out on Airbnb. These Airbnb mortgages are tailored to address the unique risks and cash flows associated with short-term rentals. They might include terms that consider the potentially higher income but also the greater vacancy risks compared to traditional rentals.
  4. Permission and Conditions: Even if a mortgage doesn’t explicitly allow Airbnb usage, a lender may grant permission if asked. Conditions might include additional fees or higher interest rates due to the increased perceived risk.

When considering using a property for Airbnb under a mortgage, it’s important to consult with the lender to ensure compliance with the terms of the mortgage and to inquire about any necessary amendments or specific products designed for short-term rentals.

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Do I need to tell my mortgage company if I Airbnb?

Yes, you should inform your mortgage company if you plan to use your property for Airbnb or other short-term rental activities. Here’s why it’s important:

  1. Compliance with Mortgage Terms: Many mortgage agreements specify how you can use the property. Using it for short-term rentals without your lender’s consent might violate these terms, potentially leading to penalties or more severe consequences, such as the call for immediate loan repayment.

  2. Insurance Requirements: Short-term rentals pose different risks compared to standard residential use, and these might not be covered under typical homeowner’s insurance policies. Informing your lender can ensure that you have appropriate insurance coverage, which is often a condition of mortgage agreements.

  3. Legal and Regulatory Considerations: Your mortgage lender will want to ensure that any rental activity complies with local laws and regulations. Non-compliance can result in legal issues that could jeopardise the mortgage security.

  4. Potential Changes in Mortgage Conditions: Depending on their policies, some lenders might require a different type of mortgage or adjust the terms of your existing mortgage if you engage in short-term rentals. This could involve different interest rates or additional requirements.

Failing to notify your lender about renting out your property on platforms like Airbnb could be seen as a breach of your mortgage contract. Always check with your lender to understand their specific policies regarding Airbnb and to obtain the necessary permissions or adjustments to your mortgage. This approach not only keeps you compliant but also helps avoid any conflicts or surprises down the line.

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Does Barclays lend on airbnb mortgages?

do provide financing options that can be used for properties intended for short-term holiday lets, which can include rentals through platforms like Airbnb. Here’s how it works:

  1. Holiday Let Mortgages: Barclays offers mortgages for holiday lets, which are properties rented out on a short-term basis to vacationers. These can be used for homes listed on Airbnb, under the appropriate conditions set by the mortgage terms.

  2. Usage of Airbnb: While Barclays does not require specific approval for using Airbnb under a holiday let mortgage, it’s crucial to ensure that the use of the property complies with the terms of the mortgage, which typically covers short-term rentals.

  3. Mortgage Conditions: When obtaining a mortgage for a holiday let that you plan to list on Airbnb, Barclays will assess factors like projected rental income and borrower eligibility. It’s important to confirm that the expected income from Airbnb meets Barclays’ criteria for holiday let mortgages.

  4. Regulatory Compliance: As with any mortgage, you must comply with local regulations and planning permissions, particularly if there are restrictions on short-term rentals in your area.

Therefore, while Barclays doesn’t have a mortgage product exclusively labelled as an Airbnb mortgage, their holiday let mortgages can be used for properties listed on Airbnb, provided they meet the necessary criteria and conditions. For the most accurate and detailed information, contacting Barclays directly or consulting with a mortgage advisor would be the best approach.

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Can I Airbnb my house if I have a mortgage?

Yes, you can Airbnb your house with a mortgage, but it’s essential to check if your mortgage terms allow short-term rentals.

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Which mortgage lenders allow Airbnb UK?

Lenders like Molo, FHL and CHL are known to permit Airbnb operations under specific mortgage products.

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What are the Airbnb mortgage rules UK?

In the UK, Airbnb mortgage rules might include restrictions on how many days per year you can rent out your property and requirements about reporting income for tax purposes.

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Do you need a buy to let mortgage to Airbnb?

Yes, since renting out on Airbnb is considered a business activity, a buy-to-let mortgage is usually necessary.

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Can you Airbnb on a residential mortgage?

Generally, no. Airbnb hosting usually requires a mortgage that explicitly allows short-term rentals, like a buy-to-let or commercial mortgage.

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What mortgage do you need for Airbnb?

You typically need a buy-to-let mortgage designed to allow for Airbnb usage and possibly account for rental income from both long and short-term rentals.

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Is there an Airbnb mortgage calculator available?

Yes, some lenders and financial websites offer an Airbnb mortgage calculator to estimate how much you might be able to borrow based on your Airbnb income. We do also, above in our page.

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Who are the leading Airbnb mortgage lenders?

Leading Airbnb mortgage lenders include FHL as well as other specialist financial institutions that consider Airbnb income.

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Can I use Airbnb income to qualify for a mortgage?

Yes, some lenders will allow you to use documented Airbnb income as part of the income assessment for a mortgage application.

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What are the conditions for a Halifax mortgage Airbnb?

Halifax does not offer mortgages specifically for Airbnb. Typically, their standard mortgage products do not support short-term rental activities like Airbnb without potential modifications to the loan type. We can assist you in finding alternative lending solutions that are tailored to accommodate Airbnb rentals such as a serviced housing, or serviced apartment mortgage.

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What are NatWest Airbnb mortgage requirements?

New and existing NatWest customers can take advantage of the bank’s revised mortgage terms, provided they comply with specific conditions. These include limiting rentals to up to 90 nights within any rolling 12-month period and using only approved platforms such as Airbnb.

This update to include Airbnb-friendly mortgage terms is a boon not only for current homeowners but also marks a considerable advancement in making homeownership more attainable. By enabling homeowners to utilise their properties as a flexible, additional source of income, NatWest is expanding the opportunities for individuals to secure and afford their own homes.

For NatWest, the approach to Airbnb and similar short-term rental arrangements is specific and varies depending on the type of property and mortgage:

  1. Buy-to-Let Mortgages:
    • NatWest generally does not allow properties under its buy-to-let mortgages to be used for Airbnb or other short-term rental platforms. This is because their buy-to-let products are designed for longer-term tenancies, which present a different risk profile compared to short-term lets.
  2. Commercial Holiday Lets:
    • For properties classified under commercial holiday lets, NatWest does accept short-term rentals such as Airbnb. These types of properties are specifically intended for holidaymakers and are usually financed under commercial lending criteria, which consider the seasonal nature and turnover of tenants typical to holiday lets.
  3. Rent-a-Room Scheme under Residential Mortgages:
    • NatWest allows homeowners with residential mortgages to participate in the Rent-a-Room Scheme, where a homeowner can rent out a room in their residence. Under this scheme, homeowners can earn a certain amount of tax-free income each year from renting out furnished accommodation in their home, which can include short-term rentals like Airbnb, provided it complies with the scheme’s conditions and the homeowner is living in the property at the time.

For anyone considering using a NatWest mortgage for Airbnb purposes, it’s crucial to directly consult with NatWest or review their latest mortgage terms and conditions. This ensures compliance and helps understand any potential requirements or restrictions specific to their mortgage products.

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Do you need a special mortgage for Airbnb?

Whether you need a special mortgage to rent out your property on Airbnb depends largely on how you plan to use the property and the terms set by your current mortgage lender.

Renting Part of Your Property

If you’re considering renting out a portion of your home — such as a room or an annex — while you still live there, you often won’t need a special mortgage. However, it’s crucial to check the terms of your existing mortgage. Some lenders allow occasional short-term rentals under a standard residential mortgage, but others may require you to inform them or approve the arrangement.

Full Property Rentals

For those planning to rent out their entire property on Airbnb, especially if it is for the majority of the year, a more specialist mortgage might be necessary. This is typically a buy-to-let mortgage, which is designed specifically for properties that generate rental income. These mortgages usually have different interest rates, lending criteria, and terms to accommodate the business aspect of continuous tenant turnover and income generation from rentals.

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Can you Airbnb your primary residence in the UK?

Yes, you can Airbnb your primary residence in the UK, but there are a few considerations and regulations you need to be aware of:

  1. Council Regulations: Local council regulations can vary significantly. Some areas may have restrictions on the number of nights you can rent out your property annually without requiring planning permission. For example, in London, you can rent out your home for up to 90 nights in a calendar year without needing to apply for planning permission. Renting for longer periods may require a change of use application.

  2. Mortgage Lender’s Permission: If you have a mortgage on your property, you need to check with your mortgage lender to ensure that renting out your property on Airbnb does not breach your mortgage terms. Some lenders may require specific types of mortgages or explicit permission to use your property for short-term lets.

  3. Insurance: Standard home insurance policies may not cover activities associated with short-term letting. It’s important to check with your insurance provider and ensure you have appropriate coverage that includes public liability and damage to property.

  4. Tax Implications: Income generated from Airbnb is subject to taxation. However, you may be eligible for the Rent a Room Scheme, which allows you to earn up to £7,500 per year tax-free from letting out furnished accommodation in your home. If you earn more than this threshold, you’ll need to complete a tax return.

  5. Leasehold Agreements: If your property is leasehold, you should also check the lease terms. Some leases prohibit subletting or using the property for commercial purposes, including short-term rentals.

  6. Neighbourhood Considerations: It’s also good practice to consider how your Airbnb activity affects your neighbours, especially in terms of noise and the use of shared spaces.

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