What is a HMO Mortgage?
A HMO mortgage is a loan used to buy a ‘House of Multiple Occupation’ (HMO) property. They differ from traditional mortgages because the property that is being bought isn’t to be used for personal use. An HMO is a property with multiple bedrooms that is shared by non-traditional groups, such as students, or any other group that doesn’t constitute a ‘household.’ It’s also commonly called a ‘houseshare.’ The HMO mortgage will be used to purchase the property, which will then be rented to others.
What Factors Influence HMO Mortgages?
There are many factors that determine the mortgage rate an applicant will receive. In some cases, a mortgage will only be granted if the applicant has an HMO license, which is a legal requirement if the property is large – for example, it’s to be rented out to five or more people.
Even if a license isn’t required, some HMO mortgage lenders require the mortgage holder to have previous landlord experience. There may also be some more general property restrictions that make a property unsuitable for this type of mortgage, too, such as homes with multiple kitchens, or more than ten bedrooms.
Another factor that’ll influence the cost of the mortgage will be the location of the property. If it’s in an area where there’s a constant demand for this type of housing, such as cities with a large student population, then the applicant will be eligible for the better rates, as it’ll be less of a risk.
Are HMO Mortgages Difficult to Get?
Aside from some of the limitations that we’ve outlined above, HMO mortgages are not especially difficult to get, though the process can be slightly more difficult than regular mortgages. Providing that you have the right financial background, have built up some money to use as a deposit, and can show that you’ll be able to rent out the property, then there’s no reason why a HMO mortgage would be denied.
As part of the application process, lenders will assess the applicant’s age, income, and credit history. Before applying, you may wish to speak with your local council, to check that there are no other legal requirements that you need to follow.
Who Can Apply For a HMO Mortgage?
In most cases, HMO mortgage lenders will ask that their applicant’s already own at least one other property and be a resident of the UK. It’s generally preferred that the applicant be the one who’s going to manage the property (as opposed to a third-party organisation).
What are the Advantages of HMO Mortgages?
There are plenty of advantages to getting a HMO mortgage, the biggest being that it offers a tremendous opportunity to boost your portfolio and potentially get a handsome return on your investment. With the housing market becoming ever more complex and unaffordable for many, there’s been a rise in people who are choosing to live in a houseshare, rather than their own home. As you’ll be receiving rent from multiple people, this method also spreads the risk, too.
These articles are for information only and no advice should be conferred from the content within. Please seek independent financial advice prior to taking any action.
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