Serviced accommodation mortgages allow the borrower a first charge loan using an investment residential property as security. The serviced accommodation mortgage is set-up so that the property is tenanted out for short terms of stay including Airbnb.
Mortgage payments are covered by the income generated by the short stay booker, depending on the property type (security) there may be restrictions on any long term tenancies.
The 2 main types of buy to let products are:
- Interest only products
- Capital and interest repayment products
A serviced accommodation mortgage provider will lend to a set percentage of the purchase price of the property and this is generally at the top end (Loan to Value) of alternate forms of finance, as of May 2020 the highest LTV available are 75-85%.
As a long-term product the rates often tend to be very competitive and the borrower is provided with a choice of a fixed or variable rate product. A fixed rate product allows the borrower to plan monthly expenditure; a variable rate product holds the advantage of a potentially decreasing monthly payment.