Financial Products
STL mortgages are one of the most misunderstood areas in property finance
Most lenders don't understand STLs. Most brokers have never dealt with the interplay between licensing, planning permission, and mortgage conditions. And the wrong mortgage can put your entire operation at risk.
The STL Mortgage Problem
The STL mortgage landscape is muddied by a fundamental disconnect. Lenders categorise properties into neat boxes — residential buy-to-let, holiday let, or commercial — but short-term lets don't fit neatly into any of them.
This confusion is compounded by the regulatory complexities that most lenders and brokers simply don't understand:
The licensing disconnect
Your property needs an STL licence to operate — but many residential mortgage lenders prohibit short-term letting in their terms. Operating without lender consent is a breach of your mortgage conditions, regardless of whether you have a licence. Some lenders will demand immediate repayment. Others won't lend at all once they know the property is an STL.
The planning disconnect
In control areas like Edinburgh, secondary lets require planning permission. But planning permission can change the property's use class — and a change of use class can affect your mortgage. Some lenders treat a property with STL planning permission as commercial rather than residential, triggering completely different (and often worse) lending terms.
The classification confusion
Different lenders classify STLs differently:
- • Residential BTL lenders — may allow “consent to let” but often prohibit short-term lets entirely
- • Holiday let mortgage lenders — designed for furnished holiday lets, but FHL tax regime is now abolished, muddying the product definition
- • Commercial mortgage lenders — treat STLs as commercial property, with higher rates, lower LTVs, and shorter terms
- • Specialist STL lenders — a small but growing niche who actually understand the sector
The result: operators often end up on the wrong product, paying too much, or — worse — in breach of their mortgage terms without realising it.
How We Help
STL Solutions works with specialist mortgage brokers and lenders who understand the interplay between STL licensing, planning, and property finance. We don't sell mortgages directly — we connect you with the right specialist for your situation.
Dedicated Holiday Let Mortgages
Purpose-built products assessed on projected rental income, not personal income. Designed for properties used exclusively as STLs.
Consent to Let / Let-to-Buy
Converting your home to an STL? Some lenders offer consent to let on existing residential mortgages. We know which ones.
Portfolio Finance
Multi-property operators need lenders who can handle portfolio structures without treating each property as a new underwriting exercise.
Remortgage & Refinance
Already on the wrong product? Moving to a specialist STL mortgage can reduce costs and remove compliance risk.
Capital Allowances & Post-FHL Impact on Mortgages
The abolition of the FHL tax regime in April 2025 has changed the financial picture significantly:
- Mortgage interest relief restricted to 20% basic rate tax credit — no longer deductible as a trading expense
- Capital allowances lost — no more tax relief on furniture, fixtures, and fittings purchases
- Business Asset Disposal Relief gone — selling an STL no longer qualifies for the reduced 10% CGT rate
- Net yields reduced — the interest rate on your mortgage now matters more than ever, since you can't offset as much against tax
Choosing the right mortgage product is no longer just about the rate — it's about understanding how the total financial picture works post-FHL. Our specialist partners can model this for your specific situation.
Typical Lending Criteria
| Criteria | Typical Range |
|---|---|
| LTV (Loan to Value) | Up to 75% |
| Minimum deposit | 25%+ |
| Income assessment | Projected rental income (125-145% coverage) |
| Minimum property value | £100,000+ |
| Term | Up to 25 years |
| STL licence required | Most specialist lenders require it |
Capital Allowances — What's Changed
The abolition of the FHL regime in April 2025 fundamentally changed the capital allowances landscape for STL operators. Understanding what you can and can't claim is now critical to your bottom line.
What you've lost
- ✗Capital allowances on furniture, fixtures, and equipment
- ✗Annual Investment Allowance (AIA) for STL property purchases
- ✗Writing down allowances on plant and machinery
- ✗First-year allowances on energy-efficient items
What you can still claim
- ✓Replacement of Domestic Items Relief (like-for-like only)
- ✓Repairs and maintenance (revenue, not capital)
- ✓Carried-forward allowances from the FHL era
- ✓Insurance premiums (fully deductible)
Key distinction: repair vs improvement
A repair (fixing a broken boiler, repainting walls, replacing a like-for-like sofa) is deductible against income. An improvement (upgrading a bathroom, installing a hot tub, replacing a sofa with a more expensive one) is capital expenditure and now has very limited tax relief. Getting this distinction right saves you money.
If you invested significantly in your STL while the FHL regime was active, you may still have unclaimed capital allowances to carry forward. Our STL Finance team can review your historic claims and identify any remaining allowances.
Non-Domestic Rates (Business Rates) Advice
One of the most consequential financial decisions for STL operators: should your property be on business rates or council tax? The answer can save — or cost — you thousands per year.
The 2026 Rateable Values Crisis
The 2026 Non-Domestic Rates revaluation has hit STL operators hard. Some businesses are facing rate hikes of 400%+. The Scottish Government introduced targeted relief following sustained lobbying by the ASSC, plus a new evidence window for challenging rateable values — but many operators remain exposed.
Business Rates vs Council Tax
The choice between business rates and council tax depends on multiple factors:
- ✓Small Business Bonus Scheme (up to 100% relief)
- ✓Can be lower than council tax for lower-value properties
- ✓Targeted Scottish Government STL relief (2026)
- ✓Business expense for tax purposes
- ✗2026 revaluation causing massive increases
- ✗Rateable values can be unpredictable
- ✗SBBS eligibility thresholds can change
- ✗Operators being removed from NDR roll (implementation issues)
What We Advise On
40% Post-Covid Relief Ending (England)
For English operators: the 40% business rates relief introduced during Covid ends on 31 March 2026. This is the last year of this discount. If you haven't already planned for the increase, now is the time.
STL Insurance
Standard home insurance policies explicitly exclude short-term letting. If a guest is injured, causes damage, or a fire occurs during an STL stay, your standard policy may not pay out — leaving you personally liable.
Licensing conditions require buildings insurance and may require public liability cover. Operating without appropriate insurance puts your licence at risk.
Buildings & Contents
Cover for guest damage, accidental damage, and malicious damage specifically designed for STL use.
Public Liability
Essential — covers claims from guests injured on your property. A licensing requirement.
Loss of Income
Replaces expected booking revenue if your property is damaged and can't be let during repairs.
Employer's Liability
Legal requirement if you employ cleaners, maintenance staff, or property managers.
Legal Expenses
Covers legal costs for claims, deposit disputes, or regulatory proceedings.
Portfolio Cover
Multi-property policies at better rates than individual policies.
Since the FHL abolition, insurance premiums remain fully deductible against rental income. However, capital allowances on replacement items are no longer available — making proper insurance cover even more critical. If items are destroyed, you can only claim under Replacement of Domestic Items Relief (like-for-like, not upgrades).
Need specialist financial products for your STL?
We connect you with brokers and providers who actually understand the STL sector — the licensing, the planning, and the financial implications.