Airbnb Mortgage Rules: Can You Airbnb Your House If You Have a Mortgage?

The holiday-let industry has been well and truly disrupted by the arrival of Airbnb. Landlords and investors with a mortgage may  wonder whether they can legally rent out their property on the short-term let platform. Indeed, short-term rentals could provide a decent return on investment. They can also provide an alternative stream of income to a longer-term letting option. This blog will take a closer look at the Airbnb mortgage rules and answer the question: Can I Airbnb my house if I have a mortgage?

What is an Airbnb?

First, before we look into Airbnb mortgage rules, let’s define what an Airbnb is.

Airbnb is an online platform that connects landlords of short-term rental properties to tourists who want a more homely alternative to a hotel when travelling. As such, an Airbnb investment is a property that has been purchased or converted by a landlord with the intention of renting it out on the Airbnb platform.

This has become an increasingly popular strategy in recent years. Particularly landlords, homeowners, and investors who are looking to diversify their property portfolios can generate higher returns on their investments.

Can you Airbnb on a residential mortgage?

Many landlords who consider turning a property into an Airbnb will likely only have a residential mortgage in place. So they’ll be wondering whether Airbnb mortgage rules allow them to list their property on the platform.

Listing a property on Airbnb on a residential mortgage is possible. However, landlords must be aware of the terms and conditions of their residential mortgage agreement before embarking on the project.

Most agreements won’t specifically rule out the use of the property as an Airbnb. Though many lenders will include clauses that prohibit landlords from using the property for commercial purposes. This can include gaining income from a short-term rental or Airbnb.

Under this kind of agreement, landlords cannot list their property on Airbnb without violating their mortgage terms. You need to be careful with this. If you violate the terms, you might face legal penalties or even foreclosure.

Can I Airbnb my mortgaged house if I live in it?

Some mortgage agreements may allow for occasional or incidental rentals. This could be renting out a room in a landlord’s primary residence on Airbnb.

However, the rules around this can vary. It’s important that you review your mortgage agreement carefully. You should speak with your lender whether you can rent out part of the property on Airbnb while still living in it.

Are there any exceptions?

Some mortgage agreements will include a condition that landlords can rent out their property if the lender gives their permission.

In this case, some lenders might allow the landlord to convert their property into a short-term rental. But, this often comes with higher charges on the mortgage.

Why do lenders charge higher mortgage rates on Airbnbs?

Lenders charge higher rates because short-term rental properties like Airbnbs present higher risks. For instance, Airbnb properties have a higher level of income volatility. Profitability relies on the number of bookings a landlord secures.

How often the property is occupied will likely depend on seasonal demands. This makes it harder for the lender to calculate how much income a landlord will make. This could affect their ability to repay the loan.

Airbnb properties also present more risk for increased wear and tear due to a higher turnover of tenants. This increases the risk of the property losing value over time.

In addition, the local area in which the Airbnb is situated could subject the property to local laws and regulations that could affect the property’s profitability. For example, some areas will have limits on the amount of time that a property can be rented out in a year. Others will have elevated levels of taxes or fees for Airbnb landlords.

Finally, you typically find Airbnb properties in areas popular with tourists and visitors. So lenders might have concerns about how saturated the local market is. If there is a greater supply of homes, Airbnb prices – and therefore yields – may be lower in that area.

With higher mortgage rates in mind, landlords should carry out due diligence to ensure that the property will generate enough income to meet their mortgage payments and turn a profit.

Do I need to tell my mortgage company about Airbnb?

Given the prospect of higher rates and additional red tape, some landlords might be tempted to list their property on Airbnb without telling their lenders.

However, failing to notify your mortgage company could be a violation of a lender’s mortgage rules. This could have serious consequences, such as penalties, foreclosure, or legal action.

Therefore, it’s always best to be transparent with your mortgage company. You will want to inform your lender of any changes in how you plan to use the property. This ensures that you’re compliant with the mortgage rules and any applicable laws or regulations.

Do I need a buy-to-let mortgage to list my property on Airbnb?

To circumvent these elevated mortgage rates and lender difficulties, some landlords might consider taking out a buy-to-let mortgage. But, what are the Airbnb mortgage rules when it comes to BTL mortgage products?

Usually, BTL mortgages are designed for letting a property on a long-term basis. If a landlord takes out a BTL mortgage, they’ll have to move out of the property. For the property to be considered as an investment the landlord is not allowed to live in it.

If you only want to rent out a room or portion of your permanent residence, a BTL mortgage would not be suitable. However, if you have bought a property for the sole purpose of using it as an Airbnb, a BTL mortgage could work well. Alternatively, you could consider a holiday-let mortgage if they plan to run the property as a business.

Can you use Airbnb income to qualify for a mortgage?

Using Airbnb income to qualify for a mortgage is possible. But it will depend on each lender’s specific mortgage rules.

Indeed, when evaluating a borrower’s ability to repay a mortgage, certain lenders may view Airbnb income as valid. However, they might ask for evidence of reliable rental income. This could be rental receipts or bank statements. Your lender may also factor in the potential risks that come with short-term rentals. Consequently, they might charge higher rates if they think there is more risk involved.

However, some lenders will not accept Airbnb income as a dependable source of income for mortgage qualification purposes. This could be due to the aforementioned volatility and unpredictability involved. In these cases, borrowers may need to look to other sources of income or assets to meet the requirements for a mortgage.

Which mortgage lenders allow Airbnb investments?

Your mortgage provider may not be open to your Airbnb plans. However, that doesn’t mean that other lenders don’t have amenable Airbnb mortgage rules. Indeed, if you intend to host guests while still living in your property, you have the option to remortgage your home with a different lender. So, which lenders allow Airbnb investments?

The minority of major high street lenders allow Airbnb investments on their residential mortgages. But those that do, have incredibly strict criteria for lending. As such, it can be difficult for investors to find a suitable lender on the high street.

Specialist finance lenders, on the other hand, have more flexible lending options than traditional banks and mortgage lenders. Oftentimes, they provide products that specifically cater to short-term rental properties, including Airbnbs.

If you consider switching lenders to remortgage before the end of your fixed term, you might need to pay early repayment charges. This fee could be as high as 5% of your outstanding mortgage balance. So it’s worth carefully weighing the potential costs and benefits before deciding.

Can I finance an Airbnb with MFS?

As we have demonstrated, Airbnb mortgage rules can be complex. It can be difficult to access finance for complex short-term rentals. However, at MFS, landlords are able to access our flexible buy-to-let mortgages to finance Airbnbs, no matter how complex a case is.

Our buy-to-let tracker mortgage, for example, features no early repayment charges after the initial 2-year rate. This provides borrowers with stability as they make long-term plans. Across our mortgage options, we employ a bespoke approach, with expert underwriting for every case.

With a max term of 5 years, and no tick box criteria, our complex buy-to-let mortgages can provide optionality for initial purchases, future long-term financing, or bridging loan exits.

As always, MFS vows to provide speed, flexibility, and commitment to landlords’ property investment goals. To find out more about the products and assistance that we can provide, head over to our website.