Is the mortgage market turbulence getting you down? Have you got a mortgage-related question you need answering? Email in and we’ll get one of our experts to reply. Nick Mendes, mortgage technical manager at John Charcol, has given his advice to a reader below. If you have a question for our experts, email us at money@inews.co.uk.
Question: I’m a buy-to-let landlord, and have two properties. In one, the tenants have asked to move out in February, and I’m thinking of turning it into a Airbnb for six months while I decide whether I want to sell. There are still two years left on the fixed mortgage. Am I allowed to rent it out as an Airbnb without telling my current lender, or do I need to remortgage to do so?
Answer: Airbnb has become a popular way for people to let out a room or property for a flexible income stream, along with other websites that let you list and advertise your property for a short term. If you’re thinking of renting a property out through Airbnb, it’s important to make sure you have the right mortgage type.
Buy-to-let mortgages are designed for rental properties and are usually interest-only mortgages.
Typically buy-to-let mortgages are for properties that you intend to rent to the same occupant for a significant amount of time – usually a minimum of 6-12 months. These operate on an AST (assured tenancy agreement basis), which means the property is rented to a tenant for a fixed term (6 -12 months) or on a period/rolling (often monthly) basis. Consequently, this means that most buy-to-let mortgages are not suitable for Airbnb properties which are often let out to different tenants for much shorter periods of time.
There’s a small handful buy-to-let mortgage lenders that do lend on short-term lets however. These lenders allow short-term lets outside of ASTs (assured tenancy agreements). Because not many lenders offer these types of buy-to-let products, you’ll often find that you’ll need to re-mortgage to a suitable product, so you’ll need to check if yours is this type first before you start renting it as an Airbnb.
It is possible to get a specific mortgage for an Airbnb property, but not all lenders will offer mortgages on this type of let. There are other elements that can make it more complicated to get a mortgage, such as what type of house or flat, or concerns over affordability.
Here are the key considerations if you need a checklist:
- If you have a mortgage you should check the conditions of your mortgage – Most lenders typically state the requirements of an AST should be at least six months.
- You may need to convert your mortgage – Depending on your lender and the terms of your mortgage you may need to remortgage your property from a buy-to-let to a holiday let.
- You could be in breach of your mortgage conditions if you don’t If you don’t contact your lender to seek permission or change mortgages, and they find out you could be hit with a fee or face a higher mortgage rate. But in some circumstances, the penalties could be far more severe. You could potentially be risking a demand for the immediate repayment of the whole mortgage or even, in theory at least, be threatened with repossession.
- Check your insurance – If you are changing the use of your property you should also check to make sure that you’re not invalidating your existing insurance policy. If anything were to happen and you don’t have specialist third-party liability insurance, it could mean that insurance claim would be rejected as your policy would be deemed null and void.
- Keep an eye on the occupant numbers – If you are renting short term to a group of five or more people (easily done with two bedrooms if the living room has a sofa bed) you may also need to get an House of Multiple Occupation licence if you don’t have one already. Failure to do this can result in prosecution and a hefty fine.
It’s always worth speaking to a whole of market broker before making any decision.
