Investing in AirBnB property

Posted by siteadmin on Thursday 2nd of January 2020.

Airbnb has the potential to take a landlord’s rental business in a new and exciting direction. However, there is often some confusion amongst would-be ‘hosts’ as to whether an existing mortgage covers this type of short term letting or if this must be declared at purchase?

Here, we answer some of the most frequently asked questions on airbnb mortgages to help landlords get to grips with the facts.

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Can landlords use a standard buy-to-let mortgage to finance a property intended solely for use as an airbnb property?

Landlords should always check with their lender before becoming an airbnb host to make sure this is allowed under their mortgage conditions. Landlords who want to let out a property on airbnb will likely need to apply for a holiday let mortgage. This depends on the number of weeks the property is intended to be used as an airbnb space.

If a landlord has a buy-to-let or residential mortgage, they should also check their mortgage conditions to see if airbnb letting is allowed. If in any doubt, give the lender a call and ask them to clarify the situation. Likewise, if a landlord is searching for a new mortgage product, always clarify whether airbnb lets are accepted. All lenders have specific criteria so it is important to clarify that all terms are understood and accurately reflect the lending situation.

What type of information will mortgage lenders want to know?

This will depend on the lender, but commonly a lender will want to check the proposed property is a single, self-contained unit and that it will be let under an approved holiday occupancy agreement for a maximum period of one month at a time.

Lenders will also want to consider mortgage affordability. One way that landlords can demonstrate affordability is through holiday rental income, often taken as an annual average so that high and low season lets can be considered. The lender may also want to know that the mortgage would be affordable if the tenancy was let on a standard tenancy agreement.

 If airbnb doesn't work out, can landlords convert their mortgage back to a standard buy-to-let property?

Sometimes having an airbnb property does not work out. Higher cleaning and support costs or more frequent vacancies may mean the economics may not be attractive in practice. If this happens, some lenders, allow landlords to revert to letting on a more standard assured shorthold tenancy agreement.

If you are planning on using part of your property as an airbnb let, for example 1-2 rooms – but not the whole property, do you need to declare this when applying for a mortgage?

Yes, it is important that lenders are made aware of the manner in which a property will be used. Being clear from the outset means potential landlords will not find themselves in the position of reneging on the mortgage terms with lenders and terms of Lending. Please take the time to discuss all options with us and we can guide you to the right lender whatever path you take.