Short-term letting is well established across the Highlands, Argyll and the islands, and a good deal of the enquiry we see involves properties in and around Fort William, Oban and Inverness. The mortgage is only part of the picture. Licensing, planning in some areas, and how a lender treats seasonal income all shape whether a purchase works, and they are better understood before you offer than after.
How a holiday let mortgage differs from buy to let
A standard buy to let assumes a single tenant on a continuing tenancy, with a rent that is the same every month. A holiday let has multiple short stays, income that varies enormously by season, and periods with no income at all. That is a different risk, and it is a different product.
Using a standard buy to let mortgage for a property let on a short-term basis is generally a breach of the mortgage conditions. Lenders do check, and the consequences range from being required to move the mortgage to the loan being called in. If the plan is short-term letting, the mortgage has to be arranged on that basis from the start.
The lender pool for holiday lets is smaller than for buy to let, and includes a number of building societies with a regional focus. It is a specialist market rather than a difficult one.
How the income is assessed
Rather than a single monthly rent, lenders typically work from a projected annual income built out of three seasonal figures — low, mid and high season weekly rates — usually evidenced by a letter from a local holiday letting agent. Some lenders average the three; others apply their own weighting or discount.
The projection is then stress tested in much the same way as a buy to let, with the income needing to cover the mortgage interest by a set margin at a rate above the one you will pay. Because the projection is an estimate rather than a contracted rent, lenders tend to be conservative with it.
Where a property has an established trading history, actual accounts are usually stronger evidence than a projection, and some lenders will prefer them.
Personal use, and the limits on it
Most holiday let lenders permit some personal use of the property, commonly capped at a set number of weeks a year. Exceed it and the property starts to look like a second home rather than a business, which is a different mortgage again.
If the intention is substantial personal use with letting around it, say so at the outset. It changes which lenders will consider the case, and it is a poor thing to discover mid-application.
Deposit and loan to value
Holiday let mortgages generally require a larger deposit than residential lending, and often somewhat more than standard buy to let. Exact requirements vary between lenders and change over time, so we would establish the current position for your case rather than quote a figure that dates.
What is worth planning for is that the cash requirement on a Scottish holiday let purchase is usually higher than people expect, because the Additional Dwelling Supplement sits on top of the deposit.
Licensing: a legal requirement, not a formality
Since the law changed in October 2022, a licence from the local council is required for all short-term let accommodation in Scotland. It applies regardless of how long you let for — the Scottish Government is explicit that it could be one night or several months — and it covers holiday cottages, B&Bs, guest houses, rooms within a home, and unconventional accommodation such as pods.
New hosts must have a licence before accepting bookings. The transitional deadline for hosts already operating before the scheme began passed on 1 October 2023, so there is no longer a route to operate while an application is pending on the basis of having let previously.
- Apply to the council,Licences are issued by the local authority for the area the property sits in, and councils may take up to twelve months to determine an application.
- Check the specific council,Fees, conditions and processing times differ between local authorities. The council covering the property is the only reliable source for its own requirements.
- Short-term let control areas,In a designated control area, planning permission for change of use is required as well as a licence. Edinburgh has been a control area since September 2022, and the Badenoch and Strathspey ward in Highland since March 2024.
- Build the timescale into your plans,A property you cannot lawfully let yet still has a mortgage to service.
Lenders are increasingly alert to this, and some will want to see the licence or evidence of an application. Planning and licensing decisions are matters for the council and, where needed, a solicitor — not something we can advise on or predict.
Purchase costs, including ADS
A holiday let is an additional residential property, so the Additional Dwelling Supplement applies. It is charged on the full purchase price rather than the portion above a threshold, it cannot be added to the mortgage, and it is payable in cash at settlement alongside your deposit and legal fees.
That single item is the most common reason a holiday let purchase budget turns out to be short. We have set out how ADS works in a separate guide. It is general information rather than tax advice — for your own position, speak to your solicitor or a qualified tax adviser.
Insurance and management
Standard residential or buy to let insurance will not cover short-term letting. You need holiday let cover, which typically includes public liability for paying guests and contents cover appropriate to a property let furnished to strangers. Some lenders make appropriate cover a condition.
Management is a practical question rather than a lending one, but it affects the numbers. Agency management of changeovers, cleaning and bookings commonly costs a substantial share of gross income, and a projection that ignores it will overstate what the property returns.
The order to do things in
Establish the licensing position with the council, get a realistic income projection, and confirm the mortgage is achievable — before you offer. A holiday let purchase has more moving parts than a buy to let, and most of the problems we see come from finding out about one of them late.
Common questions
This guide is general information, not regulated financial advice, and reflects our understanding of the rules at the date shown. Tax treatment depends on individual circumstances and may change. Your home may be repossessed if you do not keep up repayments on your mortgage. Not all buy to let mortgages are regulated by the Financial Conduct Authority.