After gaining some experience with letting properties, you might be ready for letting out HMOs. Either you convert an existing property to an HMO (or buy a brand new one), but in either case, you will need an HMO mortgage. You will need to contact your lender again if you are already a homeowner with an ordinary mortgage to buy a property.
HMO Valuations. Lender methods may differ in this area. Some lenders use the traditional surveyor inspection in combination with comparing it to other properties in the region. If there arenŐt any HMOs, the valuation will reflect the propertyŐs value as if it were a single house. However, this method doesnŐt account for HMOs that have multiple rental incomes. Therefore, it limits your borrowing options.
A House in Multiple Occupation could be more profitable than traditional buy and let. With low interest rates landlords can maximise rental yields because of the high demand for rental properties in the UK. A mortgage that is right for you will ensure your rental income makes the most of your profits.
HMO mortgages take the same amount for lenders to process as any other buy-to-let mortgage. Each case is different. Pre-pandemic it would take three to four months to receive a purchase offer, and another four to six weeks to complete.
HMO Values - The methods used by lenders to value properties can vary. Lenders can use traditional surveyor inspections, and compare it to similar properties in the area. If there is no HMO in the area then the valuation will take into account the value achieved as though it were a single family. However, this doesn't account of the extra income HMOs usually attract by having multiple rental earnings, which can limit your ability to borrow.
An HMO mortgage lender will often take rental income into account. This can significantly increase the mortgage amount. HMO mortgages are available on tracker and variable rates. LTV rates typically start at 80% LTV. Higher deposits and lower LTV ratios offer more attractive rates.
HMOs are more risky than regular BTLs. HMO tenants tend to move more quickly because they are not related, which increases the chance of voids and unpaid rents. They may be less committed to the property, which can lead them to take less responsibility for its upkeep and care. It can be harder to spot any damage or problems with a tenant.