Serviced Apartment Mortgages

Serviced apartment mortgages are used to finance properties operating as short-stay accommodation rather than standard residential rentals. Because income is often generated from bookings rather than long-term tenancies, lenders assess factors such as occupancy levels, trading model, management arrangements, and whether affordability can be supported by booking data or projected trading income.

Serviced Apartment Mortgages Require Correct Structuring From the Outset

Serviced apartment mortgages must be structured correctly from the start to avoid valuation issues, planning complications, or lender declines. Lenders assess factors such as property use, management structure, planning classification, and whether affordability is based on long-term rental value or trading performance.

Specialist Support for Serviced Apartment Mortgage Applications

We assist borrowers arranging mortgages for serviced apartments, including individual units and larger schemes. Our service supports investors and operators, with lender selection based on property type, experience, loan-to-value, and the income model used to assess affordability.

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You can often borrow up to 80% loan-to-value on a serviced accommodation mortgage, subject to lender criteria. Affordability can be based on booking averages, or on projections or trading accounts, depending on whether the property is already operating and which lender is being used.

Where a lender is comfortable with AST-based lending on a serviced accommodation property, rates are often cheaper and the case can be less specialist, but this is usually only suitable where the property type also works well as a strong yielding AST investment.

Homeownership is not always required for a serviced accommodation mortgage. Some lenders will consider first-time buyers, first-time landlords, and applicants who do not already own a residential property, provided the overall case is strong and the property fits lender criteria.

Experience is also not always essential, although lender appetite is usually stronger where the borrower can show a clear strategy, suitable income, and a property that works both as serviced accommodation and as a fallback investment. Where the case is more specialist, lender choice may reduce, but lack of ownership or landlord experience does not automatically prevent borrowing.

In high-value property markets such as London and Manchester, the disparity between serviced accommodation rental income and standard AST rental income becomes particularly pronounced. While commercial lenders consider the higher income potential from serviced accommodation, some buy-to-let lenders may still base their affordability calculations on market AST rental income. This approach can create affordability issues, as the rental income under an AST may not be sufficient to cover the mortgage payments for high-value properties.

Investors must carefully select lenders that recognise the higher income potential of serviced apartments to avoid these affordability issues. Engaging with brokers such as Mortgage Lane who specialise in serviced apartment mortgages can provide valuable insights and access to lenders who understand the unique dynamics of this market.

One of the regulatory considerations investors must be aware of is the 90-day rule, particularly enforced in London. This rule restricts property owners from renting out their homes for more than 90 days a year on a short-term basis without obtaining specific planning permission.

The 90-day rule aims to balance the interests of short-term renters with the housing needs of long-term residents. For investors, this means that exceeding the 90-day limit without proper permissions can lead to significant fines and legal challenges. It’s crucial for investors to plan their letting strategy around this regulation to avoid potential pitfalls.