HMO lenders will take into account the potential knock-on effects of higher mortgage risks on your ability pay the mortgage. The interest rates are currently at about 3%, compared with 1.7-1.8% for single-tenancy BTL.
Although every case is different, HMO mortgage applications generally take the same amount of time to process by lenders as other buy-to-let mortgages. We would estimate that a purchase mortgage offer takes three to four weeks and completion takes four to six weeks.
A House in Multiple Occupation, also known as HMO, is a property being rented to several tenants. Some of these tenants may share the same facilities such a bathroom or kitchen. HMO permits landlords to rent a property to multiple households, instead of renting it to one household.
An HMO mortgage is required if you rent to more than three tenants coming from different households. Because your property is not eligible for a regular mortgage to buy to let, they are only for single-household tenants. You could be sued by lenders if you took a regular mortgage on an HMO home.
HMOs often have higher running costs and are more difficult to manage. HMOs will require locks for each room, and there are more detailed safety and health guidelines than regular buy to rent. The setup costs of an HMO are more costly than regular buy to rent.
HMO mortgages are currently offered by 27 lenders to individual applicants and 23 to limited businesses. HMO mortgage rates tend not to be lower than the vanilla buy to rent counterparts, as they are a special property type. Lenders have benefited from increased competition in this market, which has resulted in rates starting at 1.64% to individuals and 2.69 for limited companies.
What is an HMO mortgage, and how does it work? HMO mortgages are a mortgage that landlords can use to rent their property to more than one tenant. There are some key differences between specialist buy-to�let mortgages.