The definitive guide to HMO Mortgages.
So, What are HMO Mortgages?
HMO stands for House of Multiple Occupation. They often require you to get an HMO licence, usually from the local authorities.
In real terms an HMO is a property that you rent out to multiple individuals. So each room can be rented to a different person. The obvious example of this is student accommodation. Often students can’t afford to rent a whole place to themselves, but a room in a house is much cheaper.
This therefore means that you could rent out each room separately to various people, giving them all a more affordable option for them to live in. In turn you can also potentially make more money, and have less rental voids by having multiple people living separately.
They are generally on a commercial finance basis. Quite often you may end up with a specialist lender that you have not heard of. This is quite normal.
HMO Mortgage Rates
HMO rates may vary depending on what you are looking to do. They are generally comparable to other buy to let mortgage rates.
As an HMO mortgages broker we specialise in which HMO rates will be best for your situation. If you would like a Free consultation get in touch.
HMO Mortgage Broker
What makes an HMO Mortgage Broker special? They do this all day every day. They speak to Landlords that need help getting their HMO.
HMO mortgages are generally used when you want to let out a property to multiple people. They may be Students, or professionals or anyone really.
HMO Mortgage Calculator
We don’t have an HMO Mortgage Calculator. This is because they are quite inaccurate. So much goes in to working out how much you can borrow that it can’t accurately be done on an app.
However, we can tell you over the phone. If you can spare us ten minutes over the phone we can go through it with you.
HMO Mortgage Advice
At Albion Forest we offer HMO Mortgage advice tailored to your needs. This therefore means we can help you get the right mortgage.
We also package your application with the right lender to give you the biggest chance of success. Rather than just reacting when a lender asks for another document we put the documents they want in front of them.
HMO Mortgage Rules
There aren’t really many HMO Mortgage Rules. They generally follow the same rules as any Buy to Let mortgage. Generally the lenders are the same, sometimes even the products may be the same.
Some lenders allow multiple Tenancy agreements, whereas others may want one Tenancy agreement. Most landlords tend to want multiple tenancy agreements though.
HMO Mortgage Deposit
Most lenders will want you to have a 25% deposit for HMO Mortgages. This is similar to Buy to let mortgages in general. However, you may have more options when it comes to this, so definitely speak to a specialist HMO Mortgages broker to discuss your options.
Where your deposit comes from may vary. It may be from equity, or from savings, or elsewhere.
Large HMO Mortgage
This may vary from lender to lender, but generally a large HMO would have over 6 bedrooms.
- Small HMO Mortgages – 1-4 bedrooms
- Medium – 4-6 bedrooms
- Large – 6+ bedrooms
Depending on the size of your property you may have different options. This means that you might get a different rate of interest, or product, depending on the size of your HMO. Obviously it can be appealing to have as many rooms as possible in order to maximise the amount you can make, but when you take into account the rate of interest this might not work in your favour.
6 Bed HMO Mortgage
As we mentioned a 6 bed HMO Mortgage is quite common. And it is generally the biggest your HMO could be before being considered ‘Large’
A 6 Bed HMO Mortgage is relatively straight forward and would generally fall inside normal criteria for a lender. Speak to a specialist to discuss your options for a 6 Bed HMO Mortgage.
Is an HMO Commercial Mortgage?
Yes, generally speaking an HMO would be a commercial mortgage. What does that mean? Well firstly it probably won’t be regulated by the financial conduct authority like a residential mortgage would be.
Secondly it can mean that the person you speak to may not have any mortgage advice qualifications, as the products are unregulated. You can rest assured at Albion Forest our advisors are fully qualified to help with all your mortgage needs.
HMO Mortgage for Ltd Company
Yes, you can get an HMO Mortgage for Ltd Company. This is quite common these days. Most people don’t want HMO BTL Mortgages in their personal name and would rather have them in a Ltd Company.
An HMO Company Mortgage can be beneficial. We’d recommend speaking to a tax specialist to make sure it’s the right choice for you.
HMO Mortgage Lenders
There are lots of HMO Mortgage lenders. We won’t list them all but you have specialists such as Fleet, Landbay, Paragon etc. The HMO Mortgage market is quite diverse now, with many lenders having HMO products.
There are quite a few HMO Mortgage lenders out there, the trick is knowing which one is right for you. This will come down to a few different factors, so speak to an advisor to learn more.
Who offers the best HMO mortgages?
This is constantly changing. Also, best is subjective. Best for you isn’t necessarily best for someone else. The only way to tell you who is best is to find out more about you.
Get in touch if you want to discuss your situation in a no obligation appointment.
Types of HMO Mortgages
Fixed Rate HMO Mortgages
This is probably the most common type of HMO Mortgage. Offering a fixed rate of interest for a set amount of time. Meaning your monthly payments remain the same throughout this same period. It can be incredibly beneficial to know what your monthly outgoings are going to be compared to the rent and other associated costs for an HMO.
Variable Rate HMO Mortgages
A variable rate mortgage varies depending on what the lenders variable rate or the Bank of England base rate are doing. So as they go up or down your rate of interest, and therefore your monthly payment will also go up and down. This can be good as they often do not have any early repayment charges so can be quite flexible if you need to make changes mid-mortgage.
Why should I use a specialist HMO Mortgage Broker?
We get asked this a lot. If you are considering an HMO you are likely an experienced landlord. Therefore, you probably understand the value in having a professional handle the mortgage side of things.
But, let’s go through why you should use Albion Forest for your HMO needs.
- Packaging – We package your case correctly so that you get your mortgage offer in the most timely way. Giving you the highest chance of success with your mortgage. At the end of the day you want to get the property and get tenants in!
- Cost – We don’t have set fees. We’ll discuss this with you when you call. However, we generally charge £199 per application, and a one time broker fee may be required for your first mortgage with us. But that is a lifetime fee.
- Time – We save you time. Not only so that you do not have to do the mortgage yourself and all the work that comes with it. But also, getting the right mortgage for you, and packaging your case correctly as we’ve already mentioned.