HMO Mortgages

House in Multiple Occupation mortgages (HMO) are a way for people to get onto the property ladder. They work by allowing people to purchase a property that is then let out to multiple tenants. At least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen must live in the property. It’s sometimes called a ‘house share’.

There are some risks and disadvantages associated with this type of mortgage. For example, if any of the tenants damage the property, the mortgage holder is responsible for repairing the damage. Additionally, if any of the tenants fall behind on their rent, the mortgage holder is still responsible for making the mortgage payments.

However, there are also some advantages to this type of mortgage. For example, it can be a more affordable way to get onto the property ladder. Additionally, the mortgage holder has the potential to earn rental income from the tenants.

If you’re considering a House in Multiple Occupation mortgage, it’s important to weigh the risks and advantages carefully before making a decision.

The difference between HMO Mortgages compared to regular mortgages?

HMOs or Houses of Multiple Occupancy are becoming increasingly popular investments due to their attractive yields. Their key difference is how they are rented out: room by room as opposed to letting an entire property.

This means higher returns compared to residential letting and boasts the potential for a continuing, steady stream of revenue. It also provides flexability for approaching the property market from multiple angles.

Considerations before an HMO mortgage?

Before they consider an applicant for an HMO loan, several lenders desire landlords to have prior experience. There are just a few lenders that will take borrowers without previous landlord experience.

Who is this type of mortgage suitable for?

HMO Mortgages are suitable for people who want to purchase a property that is then let out to multiple tenants. This type of mortgage can be used to purchase properties that are not necessarily located in prime areas, as it is often cheaper to buy a property in a less popular area and then let out the individual rooms.

Lenders do prefer experienced HMO landlords, but our team at IMS property group can get mortgages for first time HMO landlords.

What are the benefits of an HMO mortgage?

There are numerous benefits associated with House in Multiple Occupation mortgages. One of the main benefits is that they offer an opportunity for people to get on the property ladder who may not be able to do so otherwise. Another benefit is that they can provide a steady income stream, as the rent from tenants can be used to cover the mortgage repayments.

What are the risks of an HMO mortgage?

As with any type of investment, there are always risks involved. One of the main risks associated with House in Multiple Occupation mortgages is that the property may not be let out as often as anticipated, which could result in financial difficulty. Another risk is that the tenants may damage the property, which would again lead to financial difficulties.

What is an HMO mortgage stress test?

Stress test on HMO mortgages is the rental income versus the interest rate.

What other factors in HMO mortgage affordability

Landlords income and experience can sometimes be taken into consideration

How to get the best rates on an HMO mortgage

Looking for a best rate of HMO mortgages, larger deposit put down will equal better interest rate you will get.

When do you need an HMO mortgage?

When you are renting to individual tenants in a property.

How are HMOs different from regular buy to let?

Usually higher rates of interest due to higher risk

How much does an HMO cost to run?

Depends on the size of the property? Landlord will be responsible for the bills, council tax and usually cleaning of the communal areas.

Will I need an HMO licence?

Depends on whether the property is in a licenced area, you need to check with your local authority.

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