Tipton & Coseley Building Society has launched two new holiday lets mortgages for borrowers who let their home out using Airbnb.
This is the opposite of the grain on most mortgages, where letting your entire property out would be considered a breach of the mortgage terms.
We let you know that the mortgages work and whether they’re worth taking into consideration.
What do Tipton & Coseley’s mortgages offer?
Tipton & Coseley is offering two-year and five-year discount mortgages to people who wish to let their homes out using Airbnb.
Applicants who successfully qualify could borrow between lb50,000 and lb750,000 for a repayment term of 5 to 35 years.
Properties must have a minimum value of lb75,000, which increases to lb250,000 for properties located inside the M25 corridor.
Homebuyers may use the mortgages if they want to borrow as much as 75% from the property price.
Two-year discount rate
The two-year discount interest rate starts at 2.49% and rises towards the lender’s standard variable rate (SVR) after the two-year period ends.
Tipton’s SVR happens to be 4.99%, making the eye discount 2.5%.
This mortgage carries an agreement fee of lb999. There isn't any booking fee.
Its APRC (the average rate you'd pay should you stuck with this deal for the whole term from the mortgage) is 4.4%.
Five-year discount rate
The initial interest rate for this mortgage is 2.99%, which rises towards the BTLVR following the five-year period expires.
Currently the interest rate discount stands at 2%.
This mortgage doesn’t carry an agreement or booking fee and its APRC is 4.3%.
Renting your entire home
Most hosts on Airbnb or similar house-sharing platforms offer to let out all of their property as opposed to just a room or area of the home.
This is often considered a breach of mortgage terms for those who have a residential mortgage as it means that you’re making money from your property instead of utilizing it as the residence.
Breaching your mortgage contract could cause you facing a variety of penalties, for example having to pay increased rates of interest or perhaps getting your loan contacted.
If you buy a property using the aim of letting it out you’ll want to get a buy-to-let mortgage, which tends to have different lending criteria from the residential mortgage – including whether you should use your rental income to pay off your mortgage.
Consent to let
Some lenders provide a ‘accept to let’, which means that they will give you permission to let your property even if you initially began with a residential mortgage.
However, this really is only likely to be granted if you can prove you had no intends to discrete your house when you got it.
Often you’ll need to pay one more percentage on top of your existing mortgage rate of interest and there might be an arrangement fee.
It’s vital that you will get the best type of mortgage when you purchase your home and notify your lender associated with a alterations in your needs to avoid being penalised.
Renting out an area inside your home
The most of mortgage brokers will help you to rent out a room in your home while you’re living there.
The rent-a-room scheme means you could make tax-free money by doing this.
UPDATED (23/08/2022): This article was updated to reflect a change to Tipton & Coseley’s Standard Variable Rate from 5.49% to 4.99%.
Your home might be repossessed if you don't continue repayments on your mortgage.