TL;DR: A holiday let mortgage is for properties rented to guests for short stays of a few days or weeks.
A buy to let mortgage is for residential properties let on longer tenancies, usually six or twelve months.
Both require a minimum 25% deposit, but the mortgage products, affordability criteria, lender options, tax treatment, and management demands are quite different. Using the wrong mortgage type is a breach of your mortgage agreement, so getting this right from the start matters.
Many people looking at property investment assume that a holiday let and a buy to let are just two versions of the same thing. Both involve buying a property and renting it out, so how different can they really be?
According to HMRC, there are approximately 2.86 million unincorporated landlords in the UK declaring rental income, and yet the specialist holiday let market remains far smaller and distinctly separate, governed by its own mortgage products, lenders, and criteria.
The honest answer is: very different.
The word “let” may be the only thing they genuinely share.
These are separate products with separate lenders, separate rules, and, after significant tax changes in April 2025, a much more level tax playing field than many investors realise. Getting the distinction wrong is not just inconvenient. Using the wrong mortgage for your letting style puts you in breach of your mortgage contract, which can have serious consequences.
This article sets out clearly how each mortgage works, where they differ, and how to decide which one is right for your situation.
What Is a Holiday Let Mortgage and How Does It Work?
A holiday let mortgage is used to buy or remortgage a property that you plan to rent out to guests for short stays. Those stays are a few nights, a long weekend, or perhaps two to three weeks. Guests pay in advance and have no right to treat the property as their home.
The property must be in a location where holiday letting makes commercial sense.
Lenders will want to see evidence that there is genuine visitor demand throughout the year, not just in one busy season.
A recognised local holiday letting agent usually provides projected income figures broken down into high, medium, and low season estimates. It is this average seasonal income that the lender uses to work out how much you can borrow.
How Lenders Assess Holiday Let Applications
Holiday let affordability works differently from a standard mortgage.
Rather than looking at a fixed monthly rent, lenders assess an average annual income based on projected occupancy across the seasons. That figure is then divided by twelve to produce a monthly equivalent.
Most lenders require this monthly figure to exceed your mortgage payment by between 25% and 45%, depending on their individual criteria.
Because income can vary significantly with the seasons, lenders treat holiday lets as higher-risk than standard buy to let properties.
That tends to mean a smaller pool of lenders compared to standard buy to let, and you are more likely to be dealing with building societies, regional lenders, and specialist providers rather than high street banks. The number of lenders offering holiday let products has grown steadily in recent years, but the market remains more limited than mainstream buy to let.
The application process is often more detailed, with some lenders personally underwriting cases rather than using an automated system.
To qualify for a holiday let mortgage, you will normally need:
- A minimum 25% deposit (some lenders require 30% to 35%)
- A property in a recognised tourist location
- Income projections from an approved letting agent
- A minimum personal income (often £20,000 to £30,000 per year)
- The property to be fully furnished to a good standard
Learn more: The Complete Guide to Holiday Let Mortgages
What Is a Buy to Let Mortgage?
A buy to let mortgage is for a residential property that you rent to tenants who live there as their home.
The tenancy is usually set up using an Assured Shorthold Tenancy (AST), which is the standard legal framework for residential letting in England and Wales. ASTs start at six or twelve months and can roll on after that.
The rent is fixed for the term of the agreement and paid monthly. The tenant is responsible for utilities, council tax, and day-to-day care of the property.
You can let furnished or unfurnished, whichever suits the local market.
How Buy to Let Affordability Works
With a buy to let mortgage, the lender bases affordability on the monthly AST rental income.
A mortgage valuer, or in many cases a desktop valuation, confirms what the expected market rent is for the property. The lender then applies a stress test to make sure that rent will cover the mortgage payment with a reasonable margin, usually somewhere between 125% and 145%.
Buy to let is a well-established market in the UK, with HMRC recording 2.86 million unincorporated landlords declaring rental income in 2023 to 2024. Large high street banks, specialist lenders, and building societies all offer products.
That means more competition, a wider product range, and generally more straightforward applications for borrowers and properties that meet standard criteria.
A minimum 25% deposit is required for most buy to let mortgages, though some products are available with a smaller deposit. Both interest-only and repayment options exist.
Learn more: A Practical Guide to Buy To Let Mortgages
What Are the Key Differences Between a Holiday Let and a Buy to Let Mortgage?
The table below gives a clear side-by-side comparison of how the two products differ:
| Feature | Holiday Let Mortgage | Buy to Let Mortgage |
|---|---|---|
| Letting style | Short stays (days to weeks) | Long-term AST tenancy |
| Tenancy agreement | No AST needed | AST required |
| Rent | Weekly rates, seasonal variation | Fixed monthly rent |
| Income calculation | Seasonal average | Monthly AST rent |
| Minimum deposit | 25% (often 30-35%) | 25% |
| Property location | Tourist area required | No location restriction |
| Furnishings | Must be fully furnished | Furnished or unfurnished |
| Personal use | Allowed (incidental use) | Not permitted |
| Lender availability | Fewer, mostly specialist | Wide availability |
Why You Cannot Mix the Two
You are not permitted to use a buy to let mortgage for a holiday let, or a holiday let mortgage for a buy to let.
These products are not interchangeable. If you have a buy to let mortgage and start letting to short-term holiday guests, you are in breach of your mortgage terms. Your lender could, in the worst case, demand immediate repayment of the full loan.
Properties with Section 106 occupancy restrictions, which limit use to holiday letting only, can be financed with a holiday let mortgage. However, a standard buy to let will not work for them.
Tax: How the Two Compare After April 2025
Until April 2025, holiday lets that qualified as Furnished Holiday Lettings (FHL) under HMRC rules received considerably more favourable tax treatment than buy to let properties.
That is no longer the case.
The UK government abolished the FHL tax regime with effect from 6 April 2025 (see HMRC guidance at gov.uk). The result is that holiday lets are now taxed in much the same way as buy to let properties.
For individual landlords, this means:
- Mortgage interest relief is limited to a 20% tax credit (not a full deduction against income)
- Capital Gains Tax is charged at the standard residential property rate of 24% on disposal
- Business Asset Disposal Relief (previously known as Entrepreneurs’ Relief) is no longer available on holiday let sales
- Roll-over relief on gains is also no longer available
For buy to let, the position has been broadly similar for several years.
Section 24 of the Finance Act 2015 removed the ability for individual landlords to deduct mortgage interest in full from rental income. Higher and additional rate taxpayers saw their tax bills increase significantly as a result.
The practical takeaway is that the tax advantage holiday lets used to hold over buy to let has now largely gone for individual landlords. According to HMRC, total income from UK furnished holiday lettings in 2023 to 2024 was £2.43 billion, giving a sense of how significant this sector was before the rule change.
Should You Use a Limited Company?
For both buy to let and holiday let investors, holding properties through a limited company or Special Purpose Vehicle (SPV) can offer tax advantages.
A company can still deduct mortgage interest in full as a business expense. Corporation tax rates currently sit below the higher income tax rates that many property investors pay personally.
This is a complex area and the right answer depends on your own tax position, the number of properties you hold, and your longer-term plans.
Always take advice from a tax adviser with experience in property investment before making a decision about ownership structure. Your mortgage broker will also need to know whether you are buying as an individual or through a company, as the lender options and products will differ.
How Do Management Costs Compare Between Holiday Lets and Buy to Lets?
This is where the two investment types diverge quite sharply in day-to-day practice.
A buy to let with a good tenant and a reliable letting agent can be largely hands-off.
Rent arrives each month, the tenant looks after the property day to day, and your main involvement is periodic maintenance and any end-of-tenancy work. Management fees for a buy to let letting agent run at around 8% to 10% of rent.
The Real Cost of Running a Holiday Let
Holiday letting is a different proposition altogether.
You are effectively running a small hospitality business. The property needs to be cleaned and prepared between every stay. Linen must be laundered, consumables restocked, and the standard maintained at a level that earns good reviews and repeat bookings.
Guest communication needs to be prompt and helpful. Holiday letting management fees are generally higher as a result. Most professional holiday letting agents charge between 15% and 20% of income for a full management service, compared to around 8% to 12% for a typical buy to let letting agent.
There is also the question of void periods.
A buy to let may have occasional empty weeks between tenancies. A holiday let has regular gaps between bookings. You still need to cover the mortgage during those quiet spells. Properties in strong tourist locations with year-round appeal reduce this risk, but they rarely eliminate it entirely.
The upside is income potential.
A well-run holiday let in a popular area can generate significantly more income per year than the same property let on an AST. The equivalent weekly rate for a holiday let is often three to four times what a standard monthly rent would produce.
Whether that income justifies the extra demands is a personal judgement.
PASC UK’s 2025 Form and Value Report found that holiday let owners spend an average of 15 hours per week running their property, which gives a realistic picture of the commitment involved compared to a hands-off buy to let.
Can You Switch Between the Two?
Yes, you can convert a buy to let to a holiday let, and vice versa. You cannot, though, simply start letting your property differently without sorting the mortgage first.
There are two ways to make the switch:
- Ask your existing lender whether they offer both product types and whether they will agree to a mortgage conversion
- Remortgage to a new lender offering the product you need
Either way, you are applying for a new mortgage.
The lender will want to reassess the property, check your financial position, and confirm that the new letting style meets their criteria. Switching to holiday let means providing seasonal income projections from a local letting agent. Switching to buy to let means confirming the expected AST rent.
Check for early repayment charges on your existing mortgage before committing to a switch, as these can add meaningful cost to the process.
Which Is Right for You?
There is no single right answer. HMRC data shows there are around 147,000 dedicated holiday lets in England, representing just 0.6% of all homes, while there are 2.86 million buy to let landlords.
Both can be sound property investments when matched to the right property, location, and investor profile.
Choosing Between the Two
A buy to let suits investors who want a straightforward income stream with predictable monthly returns and lower management demands.
The property does not need to be in a tourist area, which gives you far more choice on location. Applications are generally more straightforward and there are more lenders to choose from.
A holiday let suits investors who want higher income potential and are prepared to either put in more management time or pay a good agent to handle it.
You need the right location, ideally somewhere with strong visitor appeal across most of the year. You also need a property of sufficient quality to compete in the market. The ability to use the property yourself for holidays and short breaks is a genuine perk that many investors value.
For some investors, the appeal is purely financial.
For others, it is the combination of income and personal use of a property somewhere they love. Both are good reasons to invest, but they point towards different decisions about property type, location, and structure.
How a Mortgage Broker Can Help
For a straightforward buy to let in standard residential property, you may be able to apply direct with a lender if your circumstances are uncomplicated. That said, going direct means you only see the products that lender offers.
Around a third of UK mortgage lenders deal exclusively through brokers and do not accept direct applications, so using a whole-of-market broker is the only way to access the full range of products.
For a holiday let, working with a whole-of-market mortgage broker is strongly advised.
The holiday let mortgage market is smaller, more specialist, and harder to work through without knowing which lenders are active, what their current criteria look like, and how they want applications structured.
Lenders in this space often prefer to deal through brokers rather than directly with borrowers.
A broker becomes even more important if you are buying through a limited company, dealing with a property that has non-standard features, or looking at a property in Scotland, where different legal processes apply.
Respect Mortgages can connect you with an experienced, independent whole-of-market mortgage broker who has access to specialist and broker-only lenders.
Whether you are looking at your first investment property or adding to an existing portfolio, get in touch and we will introduce you to the right expert.
Frequently Asked Questions
It depends on how the property is let. If guests stay for short breaks of a few days or weeks, you need a holiday let mortgage. If the property is rented to long-term tenants on an AST, a buy to let mortgage is the right product. Using the wrong mortgage type is a breach of your mortgage terms, so get this confirmed before you start letting.
Yes. Most holiday let lenders allow you to use the property for personal holidays and short breaks. This must be incidental use only and not the primary purpose of ownership. You cannot live in the property as your main home. With a buy to let mortgage, personal occupation of any kind is not permitted.
The minimum deposit for a holiday let mortgage is 25% of the purchase price. Some lenders require 30% or 35%, particularly for properties in higher-risk locations or where seasonal income projections are less certain. A larger deposit generally gives you access to better rates and a wider choice of lenders.
The Furnished Holiday Lettings (FHL) tax regime was abolished from 6 April 2025. Holiday lets no longer benefit from full mortgage interest deduction against rental income, Capital Gains Tax reliefs, or Business Asset Disposal Relief. Holiday lets are now taxed in broadly the same way as buy to let properties for individual landlords.
Properties must be in a location with proven visitor demand. They need to be suitable for holiday use and fully furnished to a high standard. Some lenders will also finance properties with Section 106 occupancy restrictions, which limit the property to holiday letting only. Properties with non-standard construction or unusual features may require a specialist lender.
Yes. Many property investors hold a mix of both. Each property needs to be financed with the mortgage type that matches how it is let. Where you hold several properties, lenders will look at your overall portfolio when assessing new applications. Some lenders also cap the total number of mortgaged properties or the total amount they will lend to one borrower.
