HMO mortgages are specifically designed for properties that are rented out to multiple tenants sharing communal facilities. They differ from standard buy-to-let mortgages due to the higher risk associated with HMOs.
Key Points About HMO Mortgages
- Specialist Lenders: Not all lenders offer HMO mortgages. You’ll need to work with a specialist lender or mortgage broker.
- Higher Interest Rates: Due to the increased risk, interest rates on HMO mortgages are generally higher than standard buy-to-let mortgages.
- Larger Deposits: Lenders often require larger deposits for HMO mortgages, typically around 25% or more.
- Stricter Criteria: There are stricter criteria for HMO mortgage approval, including property location, size, and condition.
- Legal Compliance: You must ensure the property complies with all HMO regulations to secure a mortgage.
Types of HMO Mortgages
- Standard HMO Mortgage: Suitable for smaller HMOs with a limited number of unrelated tenants.
- Large HMO Mortgage: Designed for properties with a higher number of bedrooms, often accommodating seven or more tenants.
- Refurbishment HMO Mortgage: For properties needing renovation before becoming an HMO.
- Student HMO Mortgage: Tailored for landlords renting to students.
- Professional HMO Mortgage: For properties targeting young professionals.
- Limited Company HMO Mortgage: For landlords operating through a limited company.
- Multi-Unit HMO Mortgage: For properties with multiple self-contained units.
- Holiday Let HMO Mortgage: For properties operating as both a holiday let and HMO.
Factors Affecting HMO Mortgage Approval
- Property Location: Properties in areas with high rental demand are more desirable.
- Property Condition: The property must meet specific HMO standards.
- Rental Income: Lenders assess the potential rental income to determine affordability.
- Landlord Experience: Experience in managing HMOs can be advantageous.
- Legal Compliance: Adherence to HMO regulations is crucial.
Seeking Professional Advice
Given the complexities of HMO mortgages, it’s highly recommended to consult with a specialist mortgage broker. They can assess your circumstances, identify suitable lenders, and guide you through the application process.