Financing a HMO property is more involved than purchasing a terraced house for example, here'll we'll run through some questions and answers to the most common questions we get asked for those looking to finance a house of multiple occupation.
Its a house of multiple occupation, basically a property let to multiple tenants, they could be students or professionals.
Well possibly not, lets give you some insight here - if we're talking about properties let to say 4 or less students or professionals, then often the property won't require a HMO licence, so assuming the tenants are on one tenancy agreement then many buy to let lenders can lend on their standard products. This means you'll get exactly the same deal as a landlord letting to one household. Increased yield with no increase in mortgage cost! It's worth noting that lenders will base their maximum loan on a one household rent despite the fact you could be receiving considerably more from multiple tenants.
With regard to licenced properties, some lenders allowing smaller HMO's only, say 4-5 bedrooms can often allow lending on their standard buy to let ranges also, so pricing isn't always impacted. It is true to say that you do need an expert here, a broker who understands what is allowed and what isn't, otherwise you could be declined upon survey having wasted a few hundred pounds. So far, we've discussed a lot of options that are available for multi let and smaller HMO properties where pricing isn't always affected.
Once we hit 6 bedrooms plus whether licenced or the property doesn't need a licence, then yes, mortgage rates and fees tend to increase, this is mainly due to the perceived risk, and also that there is less competition in these markets and therefore less choice. Most buy to let lenders don't operate in the arena, and so the help of a specialist is often the best way to find what you want.
No, not really, other than the fact some lenders for larger HMO properties (6 bedrooms plus) will wish you to evidence landlord experience, in other words show that you have rented property for a certain period, anything from 6 months to 3 years.
For smaller HMO's and multi lets, if we're using a standard lender on standard rates, then there is no difference at all assuming the valuation fits within a lenders criteria.
Extremely, the lowest rate we have currently available for licenced HMOs (January 2016) is 2.10% for a 2 year discounted deal, carrying a lowly £199 arrangement fee! The maximum bedrooms allowable is 5 with this product, and it's a 60% loan to value deal. Feel free to contact us for further details.
Technically we have lenders who have no upper limit to numbers of bedrooms, but lenders will always be risk averse to some degree and so if they feel at risk should the property be repossessed then they can walk away. Any properties with bedrooms numbering 10 and above we will generally
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