How To Invest In Airbnb Using Mortgages?

What Are Airbnb Mortgages?

Airbnb mortgages are special types of buy-to-let mortgages designed for properties you plan to rent out on Airbnb. 

They’re different from regular residential mortgages, which often don’t allow you to rent out your property without the lender’s permission. 

For Airbnb hosting, you’ll need consent from your lender, and in some cases, a specific type of mortgage. 

Types of Airbnb Mortgages

Buy-to-Let (BTL) Mortgage

This is the go-to choice for many Airbnb hosts.

A BTL mortgage is designed for properties you buy to rent them out. 

However, be ready for some lenders to set limits, such as a maximum number of days your property can be rented annually or insisting on holiday lets only. 

Residential Mortgage

For Airbnb, this option is more complex. Residential mortgages are for properties where you live. 

But, if you’re thinking of renting out a room or the whole house for extra cash, you need to get permission from your lender. Without this, you might face issues about your home insurance, and compliance with local laws.

Be prepared for lenders to impose rules like a 90-day rental cap per year.

Holiday Let Mortgage

These are specifically for properties that will be let out on a short-term basis for most of the year. They’re ideal if you’re looking to invest in a holiday home that you’ll rent out to visitors.

To get this, you’ll need to meet certain conditions – a minimum income (usually £10,000 to £40,000) and loan amount eligibility. Not all lenders offer this, and those who do may have varied criteria for what qualifies.

Commercial Buy To Let Mortgages

This is ideal for those running big Airbnb operations with multiple properties such as guesthouses, pubs, hotels, or HMOs. 

For mixed residential and commercial properties like flats above a shop, semi-commercial mortgages might be perfect. Having landlord experience is important for these mortgage types.

Should I Get Airbnb Mortgages?

Hold on a sec, Airbnb mortgages aren’t a one-size-fits-all deal. 

To decide if it’s right for you, consider these questions:

Why Do I Need An Airbnb Mortgage?

Before jumping in, define your investment goals. 

Really think about what you’re aiming for with your Airbnb venture. Is it a steady source of income or more of a side hustle? 

Knowing your goals will help you decide if an Airbnb mortgage makes sense for you.  

Apart from this, you must be ready for hands-on management and meeting guest expectations. 

Your goal with rental income is to comfortably cover your mortgage payments. Ensure to account for any unforeseen dips in occupancy.

How Much Will I Potentially Earn From This Property?

Your property’s occupancy rate directly affects your bottom line. 

Look into the demand for short-term lets in your area, including how tourism and local events might boost booking rates. 

For example, a flat in Edinburgh might see higher demand during the Fringe Festival, significantly increasing potential earnings for that period. 

It’s also wise to consider seasonal trends and how they might affect your income, planning your pricing strategy to keep your property competitive year-round.

Is My Property Right for Airbnb?

Not every place is a perfect fit for Airbnb. 

Think about it like this: what kind of places would you want to stay in on vacation? 

Great location, cool features, and a comfy feel are all important to guests.

This could be anything from a whole house to a spare room, as long as it stands out in some way.

On the flip side, some properties might be a tough sell.  Lenders can be hesitant to give mortgages for places that are way outside the norm, like a super unique house design. 

This is because they see it as a bit risky in terms of maintenance, value, and how easy it would be to sell to someone else later.

Am I Ready To Put Down a Large Deposit?

Compared to traditional mortgages, deposit requirements for Airbnb mortgages can be around 25% to 30% of the property’s value. Some can range up to 40% for properties with greater risks.

Short-term rentals are considered riskier for lenders. So, oftentimes they will ask you to put down a bigger amount.

If your finances are solid and the property’s earning potential is good, some lenders might be more flexible with the deposit amount.

Are There Any Restrictions?

Local laws, like the “90-Day Rule” in London, can cap how often you can rent out your property, potentially capping your earnings as well. 

It’s crucial to understand these restrictions as they can make or break your Airbnb business model.

Which Airbnb Mortgage Type Do I Qualify?

As discussed, there are different airbnb mortgage types. To pick the right one, you’ll want to consider what fits your goals and check out the different options lenders offer.

Things to consider are interest rates, how you repay the loan, and any specific terms that apply.

The key is to find a mortgage that works well for renting out your Airbnb. It should fit your financial situation and help you reach your investment goals.

Who Qualifies For Airbnb Mortgages?

To be eligible, you need to:

• Own a property suitable for short-term rentals.
• Have a good credit history showing you’re reliable with money.
• Prove you have a stable income to cover mortgage payments.
• Offer a deposit, often higher than for standard mortgages, sometimes up to 25-40% of the property’s value.
• Ensure your property meets local regulations and zoning laws for short-term rentals.
• Show that the expected rental income from Airbnb can cover the mortgage and operating expenses. (125% to 145% rental yield is needed for buy-to-let mortgages)
• Some lenders ask for experience in property management or hosting, although this isn’t always mandatory.

Note: criteria will depend on your chosen lender and the mortgage type you’ve picked. For the exact details, check it with your lender or talk to a good mortgage advisor.

Who Are The Lenders Offering Airbnb Mortgages?

Some lenders like Barclays, Nationwide, and Swansea Building Society offer mortgages that might fit your Airbnb plans. However, not all lenders are Airbnb-friendly. 

For instance, Santander, Natwest, HSBC, and Halifax typically don’t allow their residential mortgage customers to rent out properties on Airbnb. The available options can change, so this isn’t a complete list. 

To find the right lender for your needs, talking to an experienced broker can help. They’ll know who offers buy-to-let (BTL), residential, or holiday-let mortgages suitable for Airbnb hosting.

Switching Your Current Mortgage To An Airbnb

It all depends on what you’re planning to do. There are mainly two paths you might consider:

If you’re thinking about renting out a room in your house, the first step is to talk to your lender about getting a ‘consent to let‘. 

This allows you to rent out your property without changing your current mortgage. Be aware, that this might come with extra charges or an interest rate adjustment.

On the other hand, if renting out on Airbnb requires more flexibility than your current mortgage allows, you might need to remortgage. 

This means you’ll be looking for a new mortgage deal, possibly with a different lender, that better suits your new circumstances.

This new mortgage will have its own set of terms, rates, and conditions. Watch out for the fees though, especially if you’re on a fixed term.

The Bottom Line: How To Get Airbnb Mortgages?

First, figure out your potential rental income. You can do this by checking how much similar properties in your area are earning on Airbnb. This estimate will help show lenders you’re a good risk.

Next, get all your financial paperwork in order. You’ll need ID, proof of where you live, and information about your income. 

If you already have a mortgage, have those documents handy too. Don’t forget to show how much deposit you’re ready to put down. Then, decide what type of Airbnb mortgage suits you best.

Not sure where to start? A mortgage broker who knows the ins and outs of Airbnb mortgages can be a big help. They’ll walk you through everything from start to finish and find you the best deal.

Just get in touch with us, and we’ll put you in contact with a great mortgage broker for a free chat without any obligation.