If you live in the UK and want to take advantage of the booming tourism industry, you might be looking for a property to rent out.
A popular option could be renting it out on Airbnb, the booking app travellers worldwide use when planning a trip away. But what if you don’t have the finances to make the purchase?
In such scenarios, you can opt for an Airbnb mortgage, depending on your experience as a landlord, other properties you own, and whether you want to rent the entire house or a few rooms.
So, what is an Airbnb mortgage?
Airbnb mortgages are buy-to-let, residential, commercial, or holiday-let mortgages. We have discussed them all in this guide, along with the criteria for approval.
If you are renting out an Airbnb property, the goal is to become a super host so that more people book the accommodation. But when starting out, can you secure an Airbnb mortgage for investment purposes?
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Can You Get An Airbnb Mortgage?
Yes, you can get an Airbnb mortgage. But to be eligible for the mortgage, you must meet certain criteria.
We will discuss those factors in detail; for now, ask yourself the following questions to determine whether it would be wise to secure an Airbnb mortgage.
- Do you plan to live in a part of the property?
- Will you rent the entire house or some rooms?
- How long will you rent the property on Airbnb?
- Have you secured a consent-to-let from the lender?
What Is An Airbnb Mortgage?
An Airbnb mortgage is a type of loan designed for property owners who plan to rent out their home or a part of it on platforms like Airbnb. The lender takes into account the potential rental income from Airbnb when assessing the borrower’s ability to repay the loan.
Suppose you want to rent a property on Airbnb, so you might be looking to use a new property for short-term rental.
However, when you don’t have the cash, it can be challenging to finance the property, so you must take out a mortgage.
But getting loans for a short-term rental can be challenging, especially when looking for a second mortgage or investment opportunities.
What Are The Available Mortgages For An Airbnb?
You can choose several mortgages for an Airbnb rental if you meet the necessary criteria. We have listed and explained some of these options below:
| Mortgage Type | What Does It Mean? | |
| 1. | Residential Mortgage | Although getting a residential mortgage is tricky, it allows you to rent rooms on Airbnb. In other words, you must live in the property while renting out another part of the house to secure this home loan. Sometimes, a lender enforces restrictions on the duration for which you can rent a room or the number of rooms you can rent. In most cases, this is 90 days, and you must get consent from the lender before you rent out any of the rooms. Lenders criteria is different so you would need to make sure the lender allows you to rent on Airbnb in this case. |
| 2. | Buy-To-Let Mortgages | When you plan to rent the entire property on Airbnb, the most common loan type is getting a buy-to-let mortgage. But you might still find certain restrictions on the mortgage, varying from one lender to another. |
| 3. | Commercial Mortgage | Inexperienced landlords handling several properties will find it tough to convince lenders about the previous 2 mortgages. Their only option is to opt for a commercial mortgage, provided the property you want to let has some commercial aspect. Examples of this would be properties with a guest room, bed and breakfast, pubs, and flats over commercial properties like shops. |
| 4. | Holiday-Let Mortgage | Another option to convince your lender and rent out a property on Airbnb is getting a holiday-let mortgage. However, again you must meet the lenders criteria. |
How To Secure An Airbnb Mortgage?
The steps for securing an Airbnb mortgage vary depending on the situation and property. But we have highlighted 3 steps that are common in most instances.
Step 1: Documents
You must keep all documents, including address proof, ID, etc., ready for rental income history verification.
People with an existing buy-to-let property or residential mortgage should carry all the necessary paperwork for the house.
Moreover, create a plan and establish clear goals for the Airbnb rental.
Step 2: Potential Income
Try and estimate how much you can earn from Airbnb to convince mortgage providers that investing the money is safe.
A simple technique is determining the nightly rate and multiplying it by the days the property will be available for rental in a year.
But there are other costs as well, such as –
- Cleaning
- Utilities
- Property management fees
- Insurance
- Hosting fees
A proper estimation will help you calculate how much profit you can make.
Step 3 – Buy-To-Let Broker
Rental investment is an untapped market in many ways, and there are a lot of myths floating around regarding potential risks or gains.
To avoid confusion, contact an expert buy-to-let broker to get a detailed insight into your plans.
Professional brokers will look at your overall situation and advise accordingly on the best products and lenders to go to.
Criteria For An Airbnb Mortgage
There are no specific criteria for an Airbnb mortgage, and it depends on the type of mortgage you choose and the conditions the lender sets.
But here are a few factors that you must remember to let out certain rooms or the entire house.
1. Rooms Or The House
The type of mortgage you choose largely depends on whether you will rent out the entire house or specific rooms.
Although they might allow you to rent on Airbnb, some lenders restrict the number of rooms you can rent or fix the maximum number of days.
2. Deposit
An important question that bugs most people is how much they must deposit after securing an Airbnb mortgage.
If you have opted for a buy-to-let mortgage, the deposit amount will be larger than a residential mortgage.
But that doesn’t mean you can’t strike a competitive deal since requirements might vary. This is where a reliable broker can help by connecting you to a suitable lender.
3. Property Type
Suppose you own a fancy property with unique design elements and ultra-modern construction. Surely, you will get a great mortgage deal for the house, right? Not always!
When lenders find a property with unorthodox designs or “non-standard construction,” they place it in the high-risk category.
They might be unwilling to invest in such a property, and you will have to speak with specialist lenders to find a way out.
4. Rental Coverage
Determining the rental income is crucial when you opt for a buy-to-let mortgage. You must generate sufficient income to fulfil the mortgage payments on time. Usually, this is 125-140% of the total monthly mortgage payment.
What Are The Risks Associated With Airbnb Mortgage?
Since the Airbnb rental is an investment property, here are some challenges you will likely face.
1. House-Sharing Risk
The risks of house sharing can’t be overstated, especially for short-term rental properties. This is because you must rent out the property frequently to generate a stable income.
Also, frequently having guests who stay for short periods could pose more a risk to the property security and condition of the property if not maintained well.
2. Volatile Tourism Industry
Considering the volatile nature of the tourism industry, it’s necessary to manage Airbnb rentals actively.
Frequently Asked Questions
1. Can I get an Airbnb mortgage with a bad credit score?
You may be able to get an Airbnb mortgage despite having a bad credit score but it may be more difficult. This is why we advise speaking to a mortgage advisor who can look at your credit file and find a suitable lender for your personal circumstances.
2. How to apply for an Airbnb mortgage?
Contact a mortgage broker to file for an Airbnb mortgage. They will compare various mortgage deals to find the right lender while guiding you through the application process and clearing all queries.
**A buy to let mortgage will be secured against your property.
Some types of buy to let mortgages are not regulated by the Financial Conduct Authority.
All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.
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