MORTGAGE BROKER IN KENT, LONDON & SOUTH EAST
HMO MORTGAGES
HMO stands for Houses in Multiple Occupation and describes a property that is occupied by multiple, usually unrelated, tenants. HMO mortgages are there to provide finance for these specific circumstances.
Key Features
Products designed for HMO properties
Increased lending capability and higher loan to values due to strong rental income
Interest only available
Fixed, tracker and variable rates usually available
Minimum deposit is typically 20%
What Is A HMO Mortgage?
A House in Multiple Occupation (HMO) mortgage is a specialised financial product designed for properties rented to multiple tenants who are not part of the same household. This type of mortgage caters to landlords and property investors looking to maximise rental income by letting individual rooms rather than entire properties. Learn more with our HMO Mortgages FAQs >
Who Is An HMO Mortgage For?
HMO mortgages are particularly suited for investors targeting specific markets such as student housing, young professionals, or key workers in urban areas. They can be used to finance the purchase of purpose-built HMOs or to convert larger properties into multiple living units. HMO can be applied for in a limited company or personal name and in some cases, even a first-time landlord.
What Are The Advantages Of HMO Mortgages?
They are specifically built to lend against HMO’s and therefore consider the rental income, which is generally higher than a standard buy-to-let, giving access to higher loan amounts.
There are some mainstream lenders that offer HMO mortgages so the rates can be competitive with standard buy-to-lets in some cases.
HMO mortgages allow landlords to diversify their portfolio and therefore spread the risk of having fully vacant properties.
What Are The Disadvantages Of HMO Mortgages?
Extra checks need to be done by the lender, so the information and documentation required, is usually more extensive.
Due to the specialist valuation and extra checks, the fees associated with setting up an HMO mortgage are typically higher than a standard buy-to-let mortgage.
Examples Of Where HMO Mortgages Can Be Used
The uses for HMO mortgages are varied but can be for HMO purchases, remortgages, or even conversions from a non-HMO to a new HMO.
A working example is a client that bought an illegal HMO property (no HMO licence) and was given 6 months, after completion, to apply for the licence after completing all the other safety requirements. Once the work was done and the HMO secured, the value of the property was considered to be higher.
Process And Documentation Required For An HMO Mortgage
As well as standard mortgage documentation, HMO landlords may be asked for the following additional documents:
Licencing agreements from the local authority.
Experience letting and managing HMO properties.
A business plan.
Rental figures and portfolio details
The process is largely the same as a standard mortgage application, additional elements may include:
A specialised valuation, specifically to assess at the property as an HMO asset.
The applicant is typically responsible for paying for their own legal costs, as well as the mortgage company’s legal costs.
