Buying a holiday let? How to take out a mortgage for your property

If you dream of owning a second home to enjoy yourself and to rent to guests, then a holiday let mortgage may be the key to making this a reality. Grant Seaton offers advice on the holiday let market, rule changes and how to find the best mortgage deal

The attraction of a ‘staycation’ in the UK isn’t fading. A 2024 Sykes report confirmed that more than three-quarters (77%) of Brits planned to take a break in the UK—an increase on the previous year.

The appeal of a stress-free, more economical getaway continues to tempt millions of holidaymakers, with well-known tech platforms making it simple and accessible to book accommodation.

These dynamics have driven an increase in property investors choosing to buy properties for short-term lets rather than long-term tenancies. This type of investment requires a specialist mortgage product, known as a holiday let mortgage.

What is a holiday let mortgage?

A holiday let mortgage is specifically designed to enable investors to buy or remortgage a property that is let out on a short-term basis. With a buy-to-let mortgage, a lender will calculate affordability based on the rental income generated from long-term tenants.

However, with a holiday let mortgage, the calculation is based on projected, or actual, income from short-term lets.

Lenders use different affordability assessments, often incorporating both the landlord’s personal income and the rental profit across the year, factoring in seasonal fluctuations.

At Cumberland Building Society, for example, we base our affordability calculation on the total annual income generated by the property minus 20% to allow for letting agent costs.

Running a holiday let business requires hands-on management, though some investors opt to outsource to a professional firm.

For those managing properties themselves, advertising, handling guest bookings and maintaining the property requires considerable time and attention. However, undertaking more of the management can result in better overall profit.

While rental income from short-term lets is often higher than from long-term tenants, running and refurbishment costs—alongside specialist property insurance—may also be higher, to keep the property in peak condition.

Conducting thorough research into popular holiday lets in your locality is essential to position yourself for a strong return on investment.

What are the new rules for holiday lets?

According to countryside charity CPRE, the number of short-term let properties in the UK surged by 1,000% between 2015 and 2021. However, as the sector has expanded, it has also faced increased scrutiny, with potential regulatory changes, health and safety requirements and a growing tax burden for investors.

The taxation of holiday lets varies across the UK, with England, Scotland and Wales, each applying different rules so researching what is applicable to your property is essential.

In November 2024, the Chancellor abolished many favourable tax allowances for furnished holiday lettings (3), including offsetting mortgage interest costs, tax-advantaged pension contributions and capital allowances on fixtures and fittings. These changes will take effect in April 2025.

Despite these challenges, with the right tax advice from your accountant, and mortgage advice and support from an experienced lender, many investors remain committed to the market’s potential.

Where to find a holiday let mortgage

Several lenders offer specialist holiday let mortgages, so seeking advice from a professional mortgage adviser is crucial to finding the best option.

At Cumberland Building Society, we have been lending on holiday lets for more than 20 years. We support individuals, up to four joint applicants and limited companies.

Many investors choose to purchase property through a limited company structure due to potential tax advantages, so speaking to a specialist tax adviser is essential to determine the best approach for your circumstances.

Holiday let mortgages are available for both purchases and remortgages. If you are approaching the end of a fixed-rate deal on a holiday let mortgage, your existing lender may offer a product transfer—a simple rate switch without the need for additional paperwork.

While convenient, a product transfer may not always be the most competitive option. Furthermore, it does not always allow for additional borrowing, which may be useful for financing renovations or expanding your investment portfolio. Seeking professional mortgage advice ensures you explore all available options.

For those looking to expand their portfolio, some lenders—such as Cumberland Building Society—can accommodate up to 20 properties, as well as more complex multi-unit structures.

Every lender has a different approach. At Cumberland, we take a ‘relationship-first’ approach, underpinned by our ‘kinder banking’ ethos. Our expertise as one of the UK’s longest-standing holiday let lenders gives us a deep understanding of this specialist market, allowing us to support our customers in achieving long-term success.

A final word on holiday lets…

Talking to a professional mortgage adviser—with expertise both in the local property market and the holiday let sector—is the best way to find the right lender for your needs.

With the right financial guidance, you can turn your holiday let investment dreams into a reality.

You can find out more about Cumberland Building Society’s holiday let mortgages here.

Grant Seaton is head of intermediary lending at Cumberland Building Society

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