HMO houses can be more lucrative than regular buy-to-let investments. HMO mortgages are becoming more popular among landlords. But do you really need one? Or can a traditional buy-to-let mortgage suffice?
HMO mortgage lenders may also require information about the property. Some require that the property only have one kitchen or that tenants can share a common area. Other requirements include a limit on the number of floors and bedrooms, as well as limiting how many bathrooms and other restrictions. A lender must also agree to allow you to renovate the property before you rent it. A mortgage broker can help navigate through all of these restrictions to help you find a willing lender.
What kind of tenants can my HMO target with? - Low cost housing, affordable housing or housing benefit tenants: Sometimes landlords will let their whole properties to the local authorities. They get a discount, but still earn an income. - Working professionals - An increasing number of renters are in their late 20s or 30s. They are seeking higher-spec properties, often with more bathrooms, and less party-life-style tenants. -
HMO licenses issued by local authorities are valid for five consecutive years if approved. HMO licences must be provided for each property. A landlord might have three HMO properties. Each HMO will require a license.
HMOs are considered to be more at-risk than standard BTLs. HMO tenants have a tendency to move quickly and are often unrelated, which can increase the likelihood of voids or unpaid rentals. They might be less committed and take on less responsibility for the property's care and maintenance. A tenant may be more difficult to spot if the property is damaged or has problems.
HMO mortgage lenders are likely to take your rental income into account. This can help to increase your mortgage limit. HMO mortgages could be offered at tracker or variable rates. LTV rates generally start at 80% LTV. More attractive rates can be offered with higher deposits or lower LTV ratios.
What returns can an HMO give me?