Serviced Apartment Mortgages
Up to 80% Loan to Value
No Minimum Income
Airbnb
Last Updated on
Serviced Apartment Mortgage Specialists
Serviced apartment mortgages are used to finance properties operating as short-stay accommodation rather than standard residential rentals. Because income is often generated from bookings rather than long-term tenancies, lenders assess factors such as occupancy levels, trading model, management arrangements, and whether affordability can be supported by booking data or projected trading income.
Serviced Apartment Mortgages Require Correct Structuring From the Outset
Serviced apartment mortgages must be structured correctly from the start to avoid valuation issues, planning complications, or lender declines. Lenders assess factors such as property use, management structure, planning classification, and whether affordability is based on long-term rental value or trading performance.
Specialist Support for Serviced Apartment Mortgage Applications
We assist borrowers arranging mortgages for serviced apartments, including individual units and larger schemes. Our service supports investors and operators, with lender selection based on property type, experience, loan-to-value, and the income model used to assess affordability.
Serviced apartment mortgage tips
When looking into mortgages for serviced apartments, it’s crucial to consider certain specific factors that can impact financing. One of the primary concerns is the restrictions on the head lease, or the master lease, which may impose limitations on how you can use or rent out the property. Potential buyers should thoroughly understand any restrictions laid out in the lease agreement to ensure they align with their intended use of the property.
Check the head lease
Some leases may contain clauses that affect the resale value or finance options of the apartment, it is important that the lease does not restrict the property to be used as a serviced apartment. Understanding these details before proceeding with a purchase is essential to avoid any unexpected hurdles. Our upcoming page will delve deeper into these aspects, offering detailed insights and guidance on what to look out for when considering a mortgage for a serviced apartment.
Title restrictions, area restrictions
In our guide to serviced apartment mortgages, we’ll focus on several crucial aspects that affect your investment decisions. We’ll explain the 90-day rule, which limits the number of days per year a property can be rented out, impacting potential earnings. Additionally, we will highlight marketing strategies, particularly the use of platforms like Airbnb, and note that we collaborate with lenders who accommodate such rental arrangements.
Experience not required
We’ll also address whether lenders require previous property management experience or if newcomers can successfully secure financing. Furthermore, our guide will include frequently asked questions (FAQs) and feature an affordability calculator to help you assess potential financial commitments and returns.
This streamlined overview will equip you with essential knowledge to effectively navigate the financial landscape of investing in serviced apartments.
How much can I borrow?
You can often borrow up to 80% loan-to-value on a serviced accommodation mortgage, subject to lender criteria. Affordability can be based on booking averages, or on projections or trading accounts, depending on whether the property is already operating and which lender is being used.
Where a lender is comfortable with AST-based lending on a serviced accommodation property, rates are often cheaper and the case can be less specialist, but this is usually only suitable where the property type also works well as a strong yielding AST investment.
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Serviced Accomodation Mortgages For First Time Buyers
Homeownership is not always required for a serviced accommodation mortgage. Some lenders will consider first-time buyers, first-time landlords, and applicants who do not already own a residential property, provided the overall case is strong and the property fits lender criteria.
Experience is also not always essential, although lender appetite is usually stronger where the borrower can show a clear strategy, suitable income, and a property that works both as serviced accommodation and as a fallback investment. Where the case is more specialist, lender choice may reduce, but lack of ownership or landlord experience does not automatically prevent borrowing.
Challenges in High-Value Areas like London and Manchester
In high-value property markets such as London and Manchester, the disparity between serviced accommodation rental income and standard AST rental income becomes particularly pronounced. While commercial lenders consider the higher income potential from serviced accommodation, some buy-to-let lenders may still base their affordability calculations on market AST rental income. This approach can create affordability issues, as the rental income under an AST may not be sufficient to cover the mortgage payments for high-value properties.
Investors must carefully select lenders that recognise the higher income potential of serviced apartments to avoid these affordability issues. Engaging with brokers such as Mortgage Lane who specialise in serviced apartment mortgages can provide valuable insights and access to lenders who understand the unique dynamics of this market.
Mortgages for Airbnb Operators
Many lenders offering mortgages for Airbnb operators sit in the specialist buy-to-let, commercial, or serviced accommodation market, where short-term letting is recognised as a legitimate investment strategy. These lenders may accept Airbnb income as part of a serviced accommodation mortgage, particularly where the property has strong projected or evidenced booking performance.
By contrast, many high street lenders do not permit Airbnb or other short-term letting platforms under standard buy-to-let terms, as the property use falls outside a normal AST model. As a result, borrowers looking to operate through Airbnb often need a lender that specifically allows serviced accommodation or short-term lets, rather than a standard buy-to-let mortgage.
The 90-Day Rule and Its Impact
One of the regulatory considerations investors must be aware of is the 90-day rule, particularly enforced in London. This rule restricts property owners from renting out their homes for more than 90 days a year on a short-term basis without obtaining specific planning permission.
The 90-day rule aims to balance the interests of short-term renters with the housing needs of long-term residents. For investors, this means that exceeding the 90-day limit without proper permissions can lead to significant fines and legal challenges. It’s crucial for investors to plan their letting strategy around this regulation to avoid potential pitfalls.
Implications for Investors
The 90-day rule significantly impacts how serviced apartments can be managed in areas like London. Investors must either limit their short-term rentals to 90 days or seek planning permission to extend this period. This can affect the overall profitability of the investment, as the income generated during the permitted period must cover mortgage payments and other expenses.
Moreover, understanding local regulations and how they apply to serviced apartments is essential. For example, Manchester does not currently enforce a similar 90-day rule, providing more flexibility for investors in terms of rental duration. However, local regulations can change, so staying informed and compliant is key to a successful investment strategy.
QUESTIONS ON SERVICED APARTMENT MORTGAGES
A serviced apartment mortgage is a type of loan specifically designed for financing properties intended to be rented out as serviced apartments or short-term rentals.
Get in touchEligibility criteria typically include a good credit score, proof of income, a viable business plan, and sometimes, a certain level of cash reserves. Experience in property management is not always required.
Get in touchThe application process may require additional documentation, such as a business plan and rental income projections, and lenders may assess affordability based on potential short-term rental income.
Get in touchLocal regulations can impact rental income potential and the overall viability of the investment. Lenders consider these regulations when assessing affordability and may require compliance as a condition of the mortgage.
Get in touchServiced apartment mortgages are tailored for properties used as short-term rentals, with affordability often based on potential rental income from serviced accommodations rather than standard AST rental income.
Get in touchBoth experienced and novice property investors can apply for a serviced apartment mortgage, provided they meet the lender’s criteria, including credit score, income verification, and deposit requirements.
Get in touchDeposits for serviced apartment mortgages generally range from 25% to 35% of the property value, though this can vary based on the lender and the investor’s financial profile.
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