| Loan amount | £318,750 |
| Purchase price | £425,000 |
| Loan-to-value | 75% |
| Property type | Three-bed period cottage |
| Location | Cheddar, Somerset (BS27) |
| Use | Serviced accommodation / short-term let |
| Structure | Limited company (SPV) buy-to-let |
| Term | 25 years |
| Rate | 5-year fixed |
| Lender type | Specialist BTL lender accepting SA |
A Bristol-based portfolio landlord expanded into short-term lettings with a £425,000 period property near Cheddar Gorge.
The brief
An experienced buy-to-let landlord based in Bristol approached Fox Davidson to finance the purchase of a three-bedroom period cottage in Cheddar, Somerset. The property was to be operated as serviced accommodation, targeting weekend and holiday bookings driven by Cheddar Gorge, the Mendip Hills AONB, and the growing short-stay market in the wider Bristol commuter belt.
The client owned three standard AST buy-to-let properties in his portfolio and was diversifying into serviced accommodation for improved gross yields. The property was being acquired through his existing SPV limited company.
The challenge
Not all buy-to-let lenders accept serviced accommodation use. Many mainstream BTL lenders restrict lending to single-let AST properties only, and a significant number explicitly exclude short-term lettings from their lending criteria. Additionally, SA income is assessed differently to standard rental income: lenders typically apply a haircut to projected short-let revenue to reflect seasonality, vacancy risk, and operational overheads.
The client’s three-property background in standard BTL helped establish landlord credibility, but the case required a specialist SA-accepting lender who would look at projected nightly rates and realistic occupancy assumptions rather than applying a single-let AST rent comparable that would have significantly understated the property’s income capacity.
The outcome
Fox Davidson placed the case with a specialist BTL lender who actively supports serviced accommodation on a limited company basis. Income assessment was based on AirDNA comparables for comparable Cheddar and Mendip short-let properties, stress-tested at a 150% ICR on 70% of projected SA income, which comfortably met the lender’s affordability criteria.
The mortgage completed in six weeks from application to drawdown. The client began accepting bookings within a fortnight of completion.
Why Fox Davidson
Serviced accommodation is a niche product within the buy-to-let market, and the difference between a good outcome and a declined application often comes down to which lender is approached first. Fox Davidson arranges SA buy-to-let mortgages regularly and knows which lenders currently support this income type, how they assess projected income, and what documentation moves the application through underwriting without avoidable delays.
Frequently asked questions
How is rental income assessed for a buy-to-let mortgage?
Lenders use the Interest Coverage Ratio (ICR), typically requiring rental income of 125 to 145 percent of mortgage interest at a stress rate. Higher-rate taxpayers in personal name usually work to 145 percent ICR; basic-rate taxpayers and limited company applications usually work to 125 percent.
What deposit do I need for a buy-to-let mortgage?
Standard buy-to-let mortgages require a minimum 25 percent deposit (75 percent LTV). Some specialist lenders go to 80 percent LTV. HMO and MUFB products typically cap at 75 percent LTV.
Should I buy through a limited company or personal name?
For higher-rate taxpayers building a portfolio, a limited company structure is usually more tax-efficient because mortgage interest is fully deductible against profit at corporation tax rates. Setup and accounting costs are higher, so the benefit is clearest from £200,000+ of gross BTL income.
How long does a buy-to-let mortgage take to complete?
A complete buy-to-let mortgage application typically takes four to seven weeks from application to drawdown. Limited company and portfolio cases sometimes take longer where the wider portfolio needs underwriting.
All rates and terms are indicative and subject to individual assessment, lender criteria and property valuation. Your home may be repossessed if you do not keep up repayments on a mortgage.
Buy-to-let, HMO, MUFB, and serviced accommodation finance. Specialist landlord broker.