what you need to know about finance and insurance

If you’ve ever thought of putting your rental property on Airbnb during void periods, you’ll probably need to think again. Being able to recoup a bit of lost rental income might be an attractive idea, however…

Your Buy to Let mortgage agreement almost certainly won’t allow Airbnb

The terms of a standard Buy to Let mortgage will state that the property must be let on a 6-month minimum contract. That means you won’t be able to rent it out on a short-term basis.

The only possible solution currently seems to be via a holiday let mortgage. This is a different product to a standard Buy to Let mortgage that permits shorter lets. Not all lenders offer it but, of those that do, some have begun to consider Airbnb in the same bracket. However, you need to be aware of a few things:

• Some of these mortgages that permit Airbnb are only available in certain areas of the UK
   
• You will usually have to own at least one buy to let already – and some lenders require a minimum of three
   
• The rental income will be assessed as if it was a traditional let on an Assured Shorthold Tenancy, i.e. much lower than the potential income you’d be likely to get from short-term lets
   
• The Loan To Value (LTV) will almost certainly be a maximum of 75%

So, there are financing solutions, but they’re much harder to find and secure than if you’re letting a property via a standard Assured Shorthold Tenancy.

And if you’re tempted to go ahead and list your property on Airbnb anyway without speaking to your lender, it might not be worth it. They’re wise to the ways in which some landlords try to break the rules (even unintentionally) and have teams making online checks for breaches of mortgage conditions. If you’re caught, you could be asked to repay your mortgage in full and would have to disclose the breach on any future mortgage applications, making it much harder to get new financing. In short, it just might not be worth it.

Because there’s a greatly increased risk in letting to a third party for a very short period of time, some insurers won’t cover you at all, while others will charge a much higher premium.

Note: Remember, if you let to a tenant on an Assured Shorthold Tenancy and they sub-let a room via Airbnb, that could invalidate your landlord insurance, not to mention breach the terms of your mortgage.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Embrace Financial Services usually charges a fee for mortgage advice. The amount of the fee will depend upon your circumstances and will be discussed and agreed with you at the earliest opportunity.