Does Airbnb break your mortgage rules?

Extra cash for letting out rooms is great, but becoming an Airbnb "hotelier" is not as straightforward as it seems

Rosie Murray-West – Virgin Money Living Mentor

by Rosie Murray-West | Independent Money Mentor

Award-winning personal finance and news journalist


Using Airbnb to rent your home as a holiday let is becoming a popular way to make extra money, but you could end up in trouble. We don’t mean facing the wrath of grumpy guests when their breakfast eggs are too runny, but the rather more delicate issue of problems with your mortgage provider.

As long as you don’t mind the thought of strangers lolling around your living room in their PJs and making cruel remarks about your extensive collection of knickknacks, then renting out your house as a holiday let is tempting. Sites such as Airbnb make it easier and allow you to rent a room to guests on a short-term basis.

Whether you choose to clear off entirely and rent your whole house, or stick around to see your visitors and let out a single room it can be a way to earn extra cash. However, it must be approached with caution. Beyond the fact that you are inviting total strangers – some of whom may have extremely peculiar habits – into your home, it has ramifications for your investment, particularly if you still have a mortgage on your house. Before you get started on your Airbnb adventure there are several people you must tell; your lender, your home insurer and the taxman.

Airbnb and your mortgage lender

Different lenders have different rules when it comes to Airbnb. Ray Boulger, mortgages expert at broker John Charcol, says that because Airbnb is still relatively new, there are unlikely to be specific terms and conditions on your mortgage referencing the site. “There will be conditions about letting the property generally,” he says. “Nearly all residential mortgages include a condition that states the property cannot be let without obtaining the lender’s permission and lettings via Airbnb would come under this exclusion.”

Some lenders will charge more if you are renting the house out, while others will refuse it altogether, particularly if you are looking at a short-term holiday let, as with Airbnb lettings. You may find it easier to obtain permission for renting out just one room. David Hollingworth, mortgage broker at London and Country said: “If you are simply looking to let a spare room on a casual basis then it’s likely to be viewed more along the lines of a lodger and lenders are likely to be accepting, as the owner is still in the property during the stay.”

Airbnb and your home insurer

Your home insurer should also be consulted before you put a property on Airbnb. It may charge you a one-off fee or increase your premium. If it refuses to cover short-term lettings, and some will, there are specialist providers available through BIBA (the British Insurance Brokers Association) which provide cover for holiday lets. Airbnb claims that its Hosts Guarantee will reimburse guest damages up to £600,000, but this does not include liability insurance which is a type of insurance policy taken out by you as the home owner that covers personal injury, negligence or property damage claims made against you by members of the public, when letting out your home. The Airbnb Host Guarantee also excludes cash, pets, rare artworks and jewellery. This guarantee is not an insurance policy, and Airbnb says that you should have insurance in place as well.

Airbnb and the taxman

Even if you are renting a room or your home out on an irregular basis, you must still declare your earnings to HMRC. If Airbnb lets are your only source of income and you make less than £11,500 per year, you may not have to pay any tax on the rent. If you are renting just a room in your home you may be covered by Rent a Room tax relief, which means that the first £7,500 you earn from renting a room is tax free. This doesn’t apply if you rent out the whole property though and you must pay tax on anything above £7,500. The Government has mooted two new £1000 tax breaks for Airbnb renters, Airbnb sellers and other micro entrepreneurs, but this was not written into most recent legislation. If you are unsure on your own position, check with the tax authorities. There is For more information about paying tax on rental properties visit gov.uk .

Can I fly under the radar?

Given the rules and red tape surrounding Airbnb lettings, it may be tempting to think that you should just go ahead without telling lenders, insurers and officials. Don’t.

Mark Harris, chief executive of mortgage broker SPF Private Clients, warns that you will be in breach of your mortgage contract if you do this, which automatically invalidates your home insurance if things go wrong. Not telling your insurer compounds this and the potential losses could be huge if your guests damage your property.

As for the tax authorities, they have recently invested in a powerful Connect computer that creates a full profile of taxpayers through external sources, including Airbnb and eBay listings, so chances are you’ll be spotted.

As long as you are prepared for the eccentricities of your guests (really, who plays the tuba at 3am, cooks sausages in a toaster and irons socks on a breakfast table?) Airbnb can be a great way to increase income and invite new experiences into your home. Just be sure you have put everything in place before you get started.

Before making financial decisions always do research, or talk to a financial adviser. Views are those of our mentors and customers and do not constitute financial advice.