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Guide to Buy-to-Let HMO Mortgages

Experts in HMO Mortgages from Licenced to Unlicenced, with First Time Landlords or Portfolio Landlords. We're here to help.

What is a HMO Property?

An HMO is a rental House that has Multiple Occupants from multiple families, sharing facilities and typically renting. The full name is a House in Multiple Occupation ( HMO ).

That's as complicated as it needs to get but some may get confused as you learn more. A property can be a House in Multiple Occupation (HMO) with or without the need of an HMO Licence.

... read more on What is a HMO Property?

Are HMO's a good investment?

In comparison to renting a property to a single family. The rental income from multiple occupants oftren result in higher aggregate rental income.

This may not always be the case. It may be that shared housing is in low demand in an area compared to single family lets. A local letting agent will help you compare how much rent you will get in each configuration to help you decide.

Unfortunetly in HMO's tenant turnover may be higher. With tenants staying in HMO's for shorter periods. This can result in higher management costs and increased frequency of decoration.

Fortunetly a tenant moving out of a HMO will only result in a small decrease in rental income that month. Compared to a whole family moving out of a property, giving you no income that month. (or until its rented).

A HMO is more of an investment than a single let. You may need to apply for licences after renovation. Perhaps installing commercial fire systems, locks on doors and reconfiguring a properties layout.

HMO's can be good investments but the answer is subjective. Results may vary.

When is an HMO licence required?

There are two types of HMO Licences: National Licensing and Selective Licensing. Neither should be confused with HMO Planning Permission.

Selective HMO Licensing is where a council selects an area of the city. Properties in this area will have to obtain a licence from the council. Each council differs, so check with yours.

National Mandatory HMO Licensing is much more simple. You will be required to have an HMO Licence if the property is rented out by 5 or more people.

... read more on When is an HMO licence required?

How are HMO Properties Valued?

Your HMO Property is valued in one of two ways — either Brick & Morter or on an Investment Basis (aka Commercial Valuation).

Brick & Mortar valuation is your standard residential property valuation.  It is based on the resale value of the property as a typical home. Comparable with other none-HMO properties on the street. 

An Investment Valuation instead calculates the value as a business. The surveyor will base the amount on a multiple of the Rental Income of the property as an HMO. It is based on the resale value to another HMO Investor.

... read more on How are HMO Properties Valued?

Should you buy a HMO in a Limited Company?

As the Government looks to take more of your rental income, landlords like you are looking at HMOs to increase rental yield. The question then is if you should buy the HMO in a Limited Company?

The primary reason for setting up an HMO Investment Company is to help manage your tax affairs. Your first stop should be your accountant.

Limited Company HMO Mortgages often have higher fees or rates. We work with you and your accountant to help them calculate the best. 

Though its not all about tax...

... read more on Should you buy a HMO in a Limited Company?

How long does an HMO Mortgage take?

It takes the same amount of time processing an HMO Mortgage as any other. Up to 2 months to complete on purchase including time for Survey and Legals.

An additional step for HMO mortgage lenders is checking you have an HMO Licence, Planning (if required) and Selective Licensing (if required). 

... read more on How long does an HMO Mortgage take?

Guide to HMO Mortgage Criteria

Mortgage Lenders for HMO's have criteria on both you and your property. Will you qualify for an HMO Mortgage?

Typical mortgage criteria apply to you such as Credit Rating. Many HMO banks prefer you to have experience as a landlord before your first HMO Property. Others go further requiring experience as an HMO Landlord. There are a few lenders that accept borrowers without landlord experience.

As well as checking yourself and if you have experience or if its an HMO mortgage first-time Landlord. Lenders have different HMO mortgage criteria on other attributes. Some for example only like small HMO's or if they are in student areas.

To check HMO mortgage criteria, you can expect questions on:

... read more on Guide to HMO Mortgage Criteria

What is an HMO mortgage?

If you intend to buy (or remortgage) a property to rent it out to more than one household, you require a House of Multiple Occupancy (HMO) Mortgage.

Your standard Buy to Let Mortgage contract often limits the number of households that can live in a property and limits tenants to having just one tenancy.

An HMO mortgage is a different contract with a mortgage lender. These contracts allow you to have multiple households and each of them to have their individual tenancy (if required).

If your property does not require an HMO License, you can benefit from traditional Buy-to-Let Rates in certain circumstances. Available from a select few mortgage lenders.

If you require an HMO License or in a Selective Licensing Area you will need an HMO mortgage.

What tenant types do lenders accept?

Mortgage conditions may restrict the type of tenancy you can have in the property. This is mainly tenancies that are viewed as a higher risk; AirBNB, DSS Tenants or Students for example. You will have more lending options for professional working tenants. Viewed as a lower risk of default from a mortgage lender.

Though we have mortgage lenders that are willing to look at every situation. 

... read more on What tenant types do lenders accept?

Who does HMO Mortgages?

Only a selection of Mortgage Lenders offer Mortgages for HMO Properties. Most do not offer HMO Mortgages direct to consumer. Available only via mortgage advisers.

With it being Commercial Lending you won't find them available in an HSBC Branch. Besides this, not all mortgage brokers are the same. HMO Mortgages are in a subset of the specialist area of Buy-to-Let Mortgage Advice.

To get the best HMO Mortgage you need to talk to a Mortgage Adviser specialising in HMO Finance. We have several lenders..

... read more on Who does HMO Mortgages?

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