How To Get Airbnb Buy to Let Mortgage Finance

Updated: 13 hours ago



Operating an Airbnb space or property has become increasingly popular as travellers continually seek more comfortable and affordable accommodations when on vacation.


If you’ve ever been interested in becoming an Airbnb rental property owner but aren’t sure where to start, we look at the various factors to consider when financing a Buy-to-Let Airbnb property.


The Following Topics Are Covered Below:


What Is An Airbnb Buy-to-Let Mortgage?


Is it Harder To Get An Airbnb Mortgage?


The Benefits Of Being An Airbnb Landlord


What Has Changed Since Travel Restrictions Have Been Lifted?


Do Lenders Still Have An Appetite For Buy to Let Airbnb?


Which Lenders Are Currently Offering Airbnb Buy to Let Mortgages?


How To Get The Best Airbnb Mortgage Rates?


How Does Our Process Work?


Conclusion


Why Choose Accelerated Finance?


What Is An Airbnb Buy- To- Let Mortgage?


Airbnb is an online platform that allows homeowners to rent out their homes for short periods of time to visitors. Hosts get to decide how much to charge visitors per night and are in charge of managing the property themselves.


It’s completely free to list a property on Airbnb, but there are service fees charged to both the host and visitor for using their platform.


An “Airbnb buy to let mortgage” refers to a type of financing that can be used by an investor to buy a property for the purpose of letting the property out and using it for Airbnb purposes.


Keep in mind when trying to secure financing for an Airbnb rental property that mortgages for investment properties work differently than a mortgage for your primary residence might.


It’s likely that a larger down payment will be required to secure the financing, usually a minimum of 25-30%, and you’ll likely face higher interest rates as well. One of the main reasons for this is it poses a higher risk to the lender if there are instances of rental voids.


Is It Harder to Get An Airbnb Mortgage?


In general, it’s more difficult to get a mortgage for an investment property. In addition to the usual challenges, Airbnb and the travel industry as a whole have also recently taken a hit from the travel bans and restrictions during COVID-19.


While you may be able to secure funding for an Airbnb property, keep in mind that there will be risks when managing the property, too, as with any investment property. Below are two common risks:


Risks Of House-Sharing

Lenders tend to be averse to any potential risk when working with borrowers, so it can be somewhat difficult to secure financing for a rental property if you don’t have the cash out of pocket or a long track record of success with managing rentals.


Short-term rental properties are considered riskier than properties that operate with longer leases for a number of reasons.


First and foremost, you’re responsible for constantly renting the space out to keep income flowing. If you can’t find tenants for your space for a few weeks or a few months, you make no rent money during that time, which could affect your ability to pay back a loan on the property.


Second, if your Airbnb property isn’t also your primary residence or you’re not living on-site, this is considered a risk to your lender as well. Should you have financial troubles, the first thing you’re likely to pay if you can’t afford to make payments on everything is your primary residence’s monthly bill.


Investment properties, particularly short-term rentals, fall further down the priority list – making them something lenders will be warier to entrust mortgages for.

Risks Of The Travel Industry

Operating an Airbnb rental is not just something that will require you to constantly lease the property to tenants, it is also something that will require consistent management.


One of the biggest risks of operating a short-term rental is sharing your space with strangers. There’s always a risk a visitor could trash the property or cause damage.


While Airbnb may provide some support to you if a guest destroys your rental space, in the time it may take you to clean up, you may have to deny bookings which could result in rental voids.


There are always things that could potentially come up, and anything that causes you to have to postpone new bookings will result in lost money.



The Benefits Of Being An Airbnb Landlord


The most obvious reason is the rental income opportunities. The average earnings are only £3100 according to the Airbnb insights report, but you could earn a lot more depending on the size or the location of the property.


As an Airbnb Landlord, you may be eligible to tax benefits on the mortgage payments, cleaning costs, rental commissions and insurance payments. Further reading on the advantages and disadvantages of a limited company mortgage,



What Has Changed Since Travel Restrictions Have Been Lifted?


It’s easy to see as travel rules are now lifted that Airbnb has exploded again in popularity.


Airbnb is a great option for travellers because it’s considered these days to be more flexible with self-check-in options on arrival, not having to worry about checking out at 11 am, and most of the time if you read the reviews and do your research properly you will end up staying somewhere nice, although it costs less than a hotel.


With UK rental returns shrinking and yields down 0.6% year on year, BTL landlords are looking at Airbnb-style short-term lets with higher yields.


Current Zoopla Data suggests that the average monthly rental for a two-bedroom flat in London is around £2,000, while the same property can earn the same return on Airbnb in just half the time.


Hosts on Airbnb prior to the pandemic were earning close to £700 million from lettings which is an average of £3,000 each. This will now pick up since travel restrictions are now eased as of July 2021 by many countries in the EU.


Rural Travel has picked up. Pre-pandemic vacation getaways were often in crowded cities or costs, but now non-urban travel is up 45% and longer stays are increasing.


Professional landlords are finding that the short-term flexibility of Airbnb bookings, which is more customisable than many holiday letting agencies and websites, works well for better for them.


Do Lenders Still Have An Appetite For Buy To Let Airbnb?


Alternative finance lenders have stepped in over the years to fill in the funding gap that traditional lenders did not cater for, giving landlords the opportunity to diversify their portfolios with some choice high-return properties in sought-after holiday locations. For example, loans of up to £3 million are now available from a specialist lender for purchase or remortgage.


If you’re looking to buy a property with the sole intention of renting it out, a Buy to Let mortgage is usually the most appropriate form of lending for this purpose.


Most lenders will consider Airbnb-type lettings on Buy-to-Let mortgages, with a restriction placed on the duration of the property available for rent during the calendar year.


Which Lenders Are Currently Offering Airbnb Mortgages?


Principality Building Society


Personal name on house title only. Will lend on a purchase and remortgage of a property.


75% LTV. Standard interest and arrangement fees. AST (assured short-term tenancy) is not required.


Lending is based on projected Airbnb income; a minimum income of £20,000 is needed. Only one Airbnb property is allowed per applicant.


Paragon


Personal name on house title only. Limited company (SPV). Will lend on a purchase and remortgage on a property.


70% LTV. Higher interest rates and lenders' fees. No need for an AST. Lends based on projected standard assured tenancy agreement or proven two years holiday rental income.


A minimum of £25,000 in personal income is required.


Castle Trust


Castle Trust offer unique lending solutions, so they are most suited to those with less traditional circumstances, such as unconventional income, or those who need to refinance existing borrowing or raise capital. Higher fees reflect this flexibility.


Tipton & Coseley


This Midlands-based lender has two buy-to-let mortgage products designed for Airbnb and short-lets, allowing homeowners to let out all or part of their properties on a short-term “holiday let” basis:


Metro Bank


Metro Bank actually allows residential mortgage customers to rent out their homes on Airbnb or similar sites for up to 90 days a year without seeking prior approval.


How To Get The Best Airbnb Mortgage Rates?


To secure the best rates for an Airbnb mortgage, it’s important to be able to show strong evidence of affordability.


The track record of rental income from your property will also be crucial. The more you can prove that the repayments can be adequately covered through your income, the stronger the likelihood that you will attract lenders offering the most competitive rates.


Property Type


Every lender is different, but many don’t accept property that is non-standard, unique or a listed building. This may be because they fear the properties are at higher risk and could be harder to sell in the future.


That said, there are lenders who are happy to consider a wide range of property types.


Credit History


A poor credit record will likely have a detrimental effect on your Airbnb mortgage application and certainly influence the interest rate you may have to pay.

This will vary from lender to lender as they all adopt different rules. Some lenders will not accept such applications whereas others will consider them depending on the circumstances.


To find out how to get a mortgage with bad credit, you can view more details here


Deposit


The size of your deposit will also influence the interest rate you’ll get for a mortgage, particularly one for a new venture such as an Airbnb rental property.

The higher the deposit you can provide, the better the interest rate will be, as this offers more comfort and security for the lender.



How Does Our Process Work?


We want to make the process as quick and simple as possible. All that is required initially is to fill in the 'get started form' and we will arrange a convenient time for an introductory call.


You can read further on our full mortgage process here



Conclusion:


While COVID-19 has created issues for the travel industry, particularly Airbnb and its hosts everywhere, financing a rental property is still very possible


For current Airbnb hosts, there are plenty of financing options as well to help you invest in new properties or recover after some of the losses that came with the pandemic.



Why Choose Accelerated Finance?


We have worked with hundreds of applicants to help them secure the right deal in all kinds of circumstances.


Whether you’ve got poor credit, a complex income or are purchasing an unusual building, we have seen it all – and we’ll know exactly how to assist.


If you’re interested in financing an investment property to get started as an Airbnb host, apply for a mortgage online today.



Did you know?


Customers who are trying to source an Airbnb mortgage only have access to one-third of the Buy to Let mortgages available unless you use a specialist mortgage broker.


Disclaimer


This article is intended to provide a general understanding of the topic. The contents should not be treated as advice.