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Airbnb Mortgage

Are you ready to begin earning rental income from your Airbnb? When the Bank Says No can help you access a range of Airbnb mortgage lenders so you can achieve your buy-to-let dreams.

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Finding the best Airbnb mortgages for your situation

Airbnb mortgages are a specialised finance solution for property owners who want to maximise their rental income by utilising platforms like Airbnb. As a result, however, the criteria and repayment terms for this type of mortgage will be fairly complicated for the average layman. When the Bank Says No is an experienced team of mortgage brokers able to start, explain and streamline the whole process for Airbnb landlords.

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When you think you’ve hit that brick wall and have all but given up hope of finding mortgage finance, When the Bank Says No are here to turn your ‘No’ into a ‘Yes’. We have access to a range of specialist lenders who are willing to help those that the High Street banks just won’t touch. Get in touch today and see how we can turn your dreams into a reality.

Airbnb Mortgage FAQs

What is an Airbnb Mortgage?

An Airbnb mortgage is a product designed for properties that will be utilised for short-term rentals, usually through platforms such as Airbnb. It’s tailored specifically to adhere to the unique financial structure and income generation of these business models, with aspects such as historical rental data, average occupancy rates and market trends for similar properties being taken into account. Alternatively, if the property is already listed on Airbnb or a similar platform, lenders may use actual data from these listings to assess your ability to service the mortgage.

If you’re thinking of applying for a mortgage, consider the following:

Loan-to-Value – Lenders may offer higher LTV ratios if the projected income is strong. This is because the risk is perceived as being much lesser than otherwise, if the income stream is strong, the likelihood of defaulting on the debt is low.
Affordability calculations – When calculating affordability, mortgage lenders may consider a part of the projected or actual rental income alongside other income sources. This provides an avenue for those who wouldn’t qualify for a traditional residential mortgage.
Flexible repayment terms – Mortgage lenders understand that the short-term rental income stream can fluctuate, and may offer flexible terms that accommodate variations by season etc.
Specialised product – Lenders can offer products that are designed for short-term rentals, adding periods where only the mortgage interest is paid. This allows the borrower to maximise cash flow during the initial years of ownership until the property is properly established.

How is potential income calculated by Airbnb mortgage lenders?

Mortgage lenders require rental income potential to even consider an Airbnb mortgage unless the mortgage is funded by a separate income stream. How affordability is calculated with Airbnb mortgages are thus:

Existing lettings – If the building in question has already been an Airbnb property, lenders may look at the historical rental income data via income statements (covering a minimum of 12 months) for a comprehensive overview. A mortgage lender will always prefer to have a month-by-month breakdown of income, as this provides a window to identify patterns, such as peak and off-peak periods. These are important to understand and incorporate fluctuations.
New or unlisted properties – For future Airbnb properties, lenders use a “comparative market analysis (CMA)”. They compare your property to others in the area that are already listed on Airbnb to determine the “Average Daily Rate (ADR)”. ADR is multiplied by an estimated occupancy rate to project monthly/annual income from rent.

What is the process for gaining an Airbnb mortgage?

An Airbnb mortgage application process is a lot like any other mortgage, but with extra steps:

Eligibility criteria – Gather documentation required by the mortgage provider, such as your income, employment income and any existing rent income from the property. If your Airbnb property is already listed, include any historical income.
Specialist mortgage broker – A mortgage broker matching service is perfect when attempting to get an Airbnb mortgage. An experienced mortgage broker understands the complexities of an Airbnb mortgage and how it differs from the traditional buy-to-let mortgage. Furthermore, mortgage brokers are fantastic at streamlining the entire process, being well-versed in gathering documentation, assembling an argument for the mortgage lenders, and effectively being much like your lawyer in the interview. The broker will present different mortgage options suited for your Airbnb mortgage from several lenders, with the choice being up to you.
Attend the interview – The interview will start with our mortgage broker presenting your application, highlighting the strengths of your finances, showing mitigation and plans for its weaknesses, as well as, most importantly – the potential of your Airbnb mortgage rental property income. Throughout the process, the mortgage lender will ask questions related to your ability not only to make repayments but with your experience utilising a rental property, to ensure you make the most of your mortgage for an Airbnb. The interview is an opportunity to discuss the specific terms of the mortgage to ensure alignment with your property goals.

Can I refinance my current mortgage into an Airbnb mortgage?

Yes, you can refinance. However, with all refinance options, you have to consider the following:

Assess mortgage terms – Review the existing mortgage agreements and consider whether or not there are early repayment charges, as is often the case when deciding to refinance. Sometimes, these charges can be so considerable that it makes refinancing an inefficient option.
Check interest rates – What are your interest rates currently? It’s important to note that many lenders offer much lower interest rates for a residential mortgage and a buy-to-let mortgage than an Airbnb or holiday-let mortgage.
Eligibility evaluation – Lenders will take a look at and consider your financial situation. If you have already been renting the property via Airbnb, you may have an easier time convincing your lenders of its viability – especially if the rental history shows high occupancy rates and consistent income.
Property valuation – The mortgage lender will require a valuation of your entire property to evaluate its market value. The market value of your property ties in directly to the loan-to-value ratio which will dictate how much you’ll pay in deposit. Bear in mind that whilst 10% is often a standard measure for residential mortgages, you may be looking at as high as 30% depending on credit history and projected income.

How does rental demand affect my eligibility for an Airbnb mortgage?

A high rental demand is one of the most powerful demonstrations you can make for Airbnb mortgage applications. It affects the following factors in your application:

Income projection – Areas with high rental demand have been proven to achieve higher occupancy rates for many buy-to-let and Airbnb properties in said area. They also can command premium prices, due to being in short supply. Lending criteria typically require strong income projections for Airbnb mortgages, requiring proof that you can cover the majority of the monthly mortgage repayments on top of at least 125% of interest repayments. Conversely, areas with low demand pose an issue – as only the best rental properties (and best landlords) seem to gain consistent income.
Loan to value – In areas with high demands, lenders are willing to borrow a higher loan-to-value ratio, meaning you may be able to borrow more for your mortgage contract. This can allow borrowers to save money on the deposit and devote it to their listed property on Airbnb – thereby making it a more attractive place to rent for consumers.
Interest rate and mortgage terms – The interest rate of a property in high demand is more likely to be set lower due to the lessened risk. Interest is how mortgage lenders make their money, with it being the “price” for borrowing. Nonetheless, high demand lends a sense of security to lenders, who reflect this by offering flexible mortgage terms – such as longer repayment periods (spreading out the cost over time at the expense of higher overall interest payments), or interest only options during off-peak seasons for improved cash flow.
Property valuation – Properties in high-demand areas have higher market values. This means they are easier to sell/re-let, and lenders are more confident making deals on these properties as they are easier to liquidate in case of default. This, combined with an assurance of high performance via Airbnb rental, will directly impact the property valuation positively.

How does personal income affect my ability to get an Airbnb mortgage?

Despite the fact that rental income projections are some of the most important figures that lenders will look at, there is still a place for personal income:

Income verification – Most lenders require proof of a stable and sufficient personal income, even if rental income is projected – regardless of whether it is a salary, self-employment income, or other regular earnings. You’ll require documentation proving this – such as payslips, tax returns or bank statements.
Debt-to-income ratio – Lenders will want to know your debt to income ratio before lending you money. This effectively highlights how much you’re paying monthly to your debts, versus how much income you have free. A lower DTI means you have more disposable income which can be used for your mortgage payments, which is ideal – but not required. Although lenders use rental income evaluations as proof of repayment ability conservatively, the stronger the evidence is, the more likely they are to lower their DTI requirements.
Creditworthiness – Your income contributes to your credit strengths. Lenders view borrowers with a high, stable income as the absolute ideal candidate. This tells them that you won’t be out of income any time soon.
Interest rates – The higher your income, the lower your interest rates. Interest rates are made to scale with risk, meaning you may get flexible repayment options or lower overall interest payments. When looking at an Airbnb property mortgage, understand that properties with income variability (demand changes by season) may be considered a higher risk overall – unless you have good income to offset it.

What happens if my property is repossessed under an Airbnb mortgage?

If you fail to make payments or some other fault happens resulting in failure to pay the mortgage, then like other mortgages, your home may be repossessed. But due to the nature of an Airbnb mortgage, you may find that the consequences and procedures of differ slightly:

Repossession – The lender will always try to issue a notice of default and attempt an alternative payment plan with you regardless of mortgage type, but failing that, they can start the legal process of repossession. Once the courts have enabled the repossession, they will usually evict any occupants, including tenants.
Airbnb property impact – If the property is repossessed, any existing airbnb bookings will be cancelled. This will not only lead to financial penalties, but it may also damage the reputation of your service on the platform.

What is the rental yield required for an airbnb mortgage?

The rental yield can vary, but the following are some general benchmarks and criteria that most lenders use:

Rental coverage ratio – Lenders require a rental coverage ratio of between 125% and 145% – meaning that the projected airbnb rental income should be enough to provide a buffer for the lender.
Gross rental yield – Lenders expect a gross rental yield of at least 7% to 8%. This can be calculated by dividing the annual rental income against the property’s purchase price, then multiplying by 100. This will get you the percentage, and you will see that it reflects the higher risk associated with short term rentals versus longer term.

Can I use a Airbnb mortgage calculator to calculate the monthly mortgage payment?

Yes. Online mortgage calculators are available for any who want to calculate how much they will be paying monthly. For example:

Data input
- Property value – Enter the estimated via a professional evaluation, or using one of the free tools that sites such as Zoopla, Rightmove etc. use.
- Loan amount – Specify the amount you plan to borrow (we recommend keeping LTV ratio in mind).
- Interest rate – Input the interest rate you expect based on the mortgage product you’re considering.
- Loan term – Set the loan term, such as 15, 20, 25 years.

This should provide you with an estimate of your monthly mortgage payments.

What is the difference between an Airbnb and a holiday lets mortgage?

Both mortgage types are similar, as they both cater to properties offering short-term rentals. The difference is in how they are structured:

Airbnb mortgage – This type of mortgage is tailored specifically to properties that are to be rented out for varying lengths of time, such as a night to a week. This requires both a demand and a good property to generate income. A landlord has much more control over what they do with the property during times it’s not in use, which can be fairly often.
Holiday lets mortgage – A holiday let mortgage is designed for properties that are rented out as holiday accommodations, often located in tourist areas. They are rented out on a short term basis, usually a week or so, during peak holiday seasons. Like with an Airbnb, the mortgage provider will try to ascertain what the potential rental income is as part of the deal.

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