You can maximise your rental yield when you compare from some of the leading HMO mortgage providers in the UK with our nationwide mortgage specialists. Obtaining the best LTD Company HMO Mortgage for your circumstances.
Only a minority of Mortgage lenders offer HMO Mortgages, a smaller minority offering Limited Company HMO Mortgages. Add in the the rules around landlord finance from unusual properties, rental stress tests and more so for portfolio landlords. Then your personal circumstances can limit options from minimum income, credit score and experience. A sensible property investor will seek advice from a specialist in HMO Mortgage Finance.
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Yes. If after discussion with your accountant you believe you will be in a better position to purchase an HMO with a Limited Company SPV. We can assist you.
Only a minority of Mortgage lenders offer HMO Mortgages, a smaller amount offering Limited Company HMO Mortgages. The mortgage products may differ from standard HMO mortgages but many offer similar products.
We can help you register your Property Company, or your accountant. It's important to register the correct SIC Codes and have a bank account in the company open for the mortgage direct debit.
As with a standard mortgage, they will base the lending on your personal circumstances. So a new SPV Company with no assets or income, set up on the same day for example is fine. They will require a personal guarantees from the directors / shareholders and sometimes charges over the company.
You can lend money to the company for the deposit from your personal assets.
Mortgage Lenders prefer companies that will only own and rent property. They dislike trading companies doing other activities. Though a trading company can lend funds to a property company for the deposit.
A House of Multiple Occupancy (HMO) is a home that is rented out by multiple people who are not from 1 household (e.g. a family).
These unrelated people share facilities like a bathroom and kitchen but have individual bedrooms. It is often called a "house share" or pictures up images of student living.
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.
The HMO Mortgage market is in a constant flux with lots of competition. This means rates vary from time to time within the Loan-to-value (LTV) ranges. If you have a small HMO a minority of lenders may allow you to mortgage on standard buy-to-let rates, large HMOs may require commercial rates.
Given these complexities - its always best to talk to a specialist HMO Mortgage adviser at Bespoke Finance to find the best mortgage for your needs and circumstances.
The minimum HMO Mortgage deposit is 15% of the property value (85% LTV).
The rental amount can limit the maximum loan achievable, requiring higher deposits. Landlords with more substantial deposits can enjoy better HMO Mortgage products and rates.
HMO Mortgages often have higher rental stress tests than standard buy to let properties. On the other hand, you should obtain higher rent compared to a standard buy-to-let.
New regulations limit borrowing based on the rent deemed achievable by the lender's valuer. The minimum is assessed at a rate of 5.5% ensuring a 125% coverage.
Simply for a £100,000 mortgage you would need at least £572 rent.
That demonstrates the minimum - mortgage lending criteria may be more robust.
Landlords who are higher rate taxpayers or have personal income below a threshold. Have higher stress tests.
Landlords who are higher rate taxpayers, often get five-year fix mortgages or invest via a limited company to obtain lower stress tests.
Property types also affect affordability with HMO Mortgages having higher stress tests compared to standard lets.
Our mortgage advisors will assess the market to help find the best mortgage given the anticipated rental amount. We can recommend structures to get the lower stress tests or help release equity to fund higher deposits.
HMO Mortgage contracts typically require you to rent out the property within a short period. They do not give you time to refurb the property heavily.
Property Investors typically use short-term bridging finance from 3 to 6 months to purchase the property. Use that time to renovate, bringing it up to HMO standard (apply for HMO License). Then re-mortgage onto an HMO Mortgage at better rates. Sometimes increasing the value as they go.
The new HMO rules are covered by “The Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018” and will come into effect across England on the 1st of October, 2018.
You will require an HMO License (from your local authority) for any property occupied by five or more people, forming more than one separate household.
Removing the opt-out clause depending on how many storeys a property has.
HMO Mortgage Lenders often require you to have applied for an HMO mortgage license from your Local Authority (if required) at application.
This criteria changes from lender to lender, so check with your Bespoke Finance Mortgage Adviser.
Each council's selective licensing rules (if they have any) are different, so we can not set out here if you need authorisation or not.
HMO Mortgage lenders often require you to have applied for the selective license from your Local Authority (if required) at application. This criteria changes from lender to lender, so check with your Bespoke Finance Mortgage Adviser.
Which type of valuation is up to the lender, typically Buy to Let lenders will use a standard valuation, and commercial lenders may in some circumstances use a commercial assessment.
Typically if the property looks like or is a converted residential property – it will be on a standard valuation. If it is an ex-care home or other purpose-built or substantially not residential – the lender can value it on commercial terms.
There are some disadvantages - commercial terms often come at low loan-to-value and often higher rates. They may require the mortgage on repayment terms and other commercial contract obligations. Such as having life insurance.
There are some advantages - the property as a commercial entity can be valued higher base dont the rental income generated by the business. Rather than bricks and mortar valuation.
Most HMO Mortgage lenders base their valuation on bricks and mortar. Those that do offer it have varied conditions such as having C4 planning approved (not automatic C3 to C4 planning).
Local authorities regulate room size in HMOs by relying on their discretionary powers to impose license conditions. You should check with your local authority if your room sizes are big enough.
The government also has minimum sizes. Rooms used for sleeping by one adult will have to be no smaller than 6.51 square meters, and those slept in by two adults will have to be no smaller than 10.22 square meters. (if a communal living room is supplied).
Other room sizes may make a property unmortgageable if it has more occupants than the minimum. A kitchen for four persons needs to be 6m2, to 9m2 for six persons and 11m2 for ten persons.
When a room size is smaller, the surveyor will report back “The current configuration of the property has been assessed in accordance with the minimum room sizes and amenities published within the current RICS guidance.”.
This can get your mortgage declined. You could use bridging finance to re-arrange the rooms via refurbishment to make them fit.
Yes. If you are buying in a Limited Company the directors and shareholders are required to sign a personal guarantee. This is not often waived, unless it is very low LTV or the company owns other unencumbered assets. In such cases a charge on the company as a whole may also be taken.
Asking a lender to take a risk by lending you the money, but you requesting not to give those same guarantees personally. As you imagine is not looked upon lightly.
Given a minimum deposit of 15% of the value, often larger. Unless the asset depreciates in value or given missed payments adding to the amount owed, a personal guarantee may be seen as medium risk. With the personal guarantee released on full repayment to the lender (such as selling the property).
It's not impossible, but the lending options are limited. In such circumstances, it may be viable to ask a 3rd party homeowner or experienced landlord to a joint venture.
It's not impossible, but the lending options are limited. Mortgage lenders prefer HMO Borrowers to have experience as a private landlord before taking on multiple tenants.
Many mortgage lenders require 12 months experience as a Buy to let Landlord before application for an HMO Mortgage.
Do not expect to be able to mortgage a very large HMO if you have no experience as a landlord.
Yes. You can obtain Interest Only HMO Mortgages or Repayment HMO Mortgages. Whichever suits your requirements and risk profile.
HMO Mortgages are not regulated by the Financial Conduct Authority (FCA). These are classed as commercial mortgages and borrowers are expected to have undertaken decisions as businesses, not consumers.
There is no Consumer HMO Mortgages available on the market, where you can rent to a family member for example.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Bespoke Finance is a trading style of Bespoke Finance Direct Limited.
Bespoke Finance Direct Limited is authorised and regulated by the Financial Conduct Authority (No. 715805) to transact regulated mortgages.
The FCA does not regulate some investment mortgage contracts.
Bespoke Finance Direct Limited is registered in England and Wales (No. 09623432) at 31 Church Lane, Pudsey, LS28 7LD.
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