HMO Mortgage Advisors.
The Mortgage Experts Online accredited advisors are specialists in HMO mortgages. Furthermore, our expert’s knowledge will help you to find the right HMO mortgage on the market.
From big high street banks and building societies, to smaller more niche mortgage lenders, there is a lot of choice out there. Subsequently, this may feel completely overwhelming to you and you may have no idea where to start. We can offer you guidance and help you navigate the complex world of regulated HMO mortgages.
The brokers we work with are whole of market and offer completely unbiased advice, ensuring that you get the absolute best deal available.
Scroll down for more information and FAQ’s.
Updated 19th December 2020
The number of people looking at HMO mortgages has increased significantly as landlords are seeing this as a way to try and make the most profit from one property, with potential rental yields in excess of 10%.
As with anything, things are never that simple – there are many extra things to consider which we will cover in this article. The HMO mortgage experts we work with will be able to give you the best unbiased advice possible. Mortgage criteria is vastly different than standard buy to let mortgage criteria making HMO mortgages a specialist area of lending.
What is an HMO?
The abbreviation HMO stands for House in Multiple Occupation. This means the landlord will rent out bedrooms separately to individuals on separate tenancy agreements with the tenants sharing communal living spaces such as kitchens, bathrooms and living rooms. The landlord will pay the council tax, utilities and running costs for the property as a rule. You will always need a HMO mortgage for a house of multiple occupancy.
Will I need an HMO mortgage licence?
Some properties will require an HMO licence. However, each council is different with regards to their HMO licencing criteria. If your property does require a licence, then you will need to contact your council to get this arranged. As such, best advice is to check with your council so you can make an informed decision about any future property purchases as there will be costs involved with obtaining the licence.
You can click here to check if you need a licence.
Can I get an HMO on a standard buy to let mortgage?
No, there are specific mortgage products for HMO properties. If you obtain a standard buy to let mortgage with a view to run a HMO you will be in breach of your mortgage contract (who will insist that the whole property is let on a single AST (Assured Short hold Tenancy agreement) rather than room-by-room), and if discovered the lend may give you 30 days to repay the outstanding mortgage balance.
HMO mortgages on the high street.
Generally, high street lenders are unwilling to deal with this type of mortgage. However, there are select specialist lenders who have specific products that are geared towards this lending.
The criteria are strict, and each lender will have their own criteria around some or all of the following aspects
- Number of bedrooms and communal rooms the property has?
- Landlords experience – do they have any previous buy to let experience?
- Does the property need an HMO licence?
- Minimum property value.
- Minimum age on application.
- Maximum age on application and at the end of the mortgage term.
- Personal income.
- Credit profile.
- UK residency.
HMO mortgages with bad credit.
Consequently, the more severe the bad credit the more difficult a HMO mortgage will be. However, the types of bad credit which you could potentially be accepted for a mortgage are.
- Late Payments
- Debt Management Plans
- County Court Judgement
- IVA – Individual voluntary arrangement.
The bigger your deposit the better the options will be. HMO mortgages with bad credit tend to come with higher product fees and associated costs. You should always seek advice from a specialist broker for this type of mortgage. To read our article all about bad credit mortgages click here.
Because you’ve had previous bad credit, then getting an updated copy of your credit report is vital. To get an updated credit report click here.
Can I purchase an HMO through an SPV Limited Company?
There are lenders who will allow this type of purchase subject to their criteria. However, the options do tend to be limited in this area. Your HMO mortgage expert will be able to advise on the best option available to you. With all Limited Company buy to let purchases it is vital you speak to a tax specialist to ensure that this is the right type of structure for your circumstances, as your mortgage expert likely won’t be qualified to give tax advice. To read out article about limited company mortgages click here.
HMO mortgage rates
Because of the specialist nature of the lending and the smaller availability of mortgages, the interest rates are slightly higher than standard buy to let mortgages. This is to offset the perceived additional risk, as from a lenders point of view if the property was repossessed there could be extra work needed to convert it back into a standard property which would appeal to a wider selection of buyers.
Compared with a standard buy to let, the extra income that is typically generated from an HMO should be enough to cover the higher interest rates. Therefore, In order to get the best rates, and the most options a standard 75% Loan to value is normally the starting point, there are options at 80% LTV but again this is at a higher rate and tighter criteria.
From the information above you can see the HMO mortgage market requires a true expert to advise and guide you, with most specialist lenders only accept applications via an intermediary.
Speak to an HMO mortgage advisor.
Our HMO mortgage experts will look at each case before deciding which lender is right for you and your individual circumstances. All the HMO mortgage brokers we work with are whole of market and offer unbiased advice. They will have access to all the specialist lenders to really enhance your chances of achieving the mortgage you need.
The HMO mortgage expert brokers we work with have experience in dealing with all aspects of HMO mortgages, Coupled with using the whole of the market to access the very best deals available.