HMO mortgages are a unique financing option for residential investors or landlords looking to purchase properties that are Homes in Multiple Occupancy. Homes in Multiple
Occupancy, also called bedsits, is a residential property occupied by multiple tenants who share common areas, such as the bathroom, kitchen, and/or living room.
These types of properties are most often rented to college students or young professionals who need affordable housing in a city setting. Because of the current housing market conditions in the United Kingdom, HMOs have become very popular among renters and even more profitable for landlords and residential investors.
Details about Interest-Only HMO Mortgages
Interest-only HMO Mortgages are available to residential investors or landlords looking to cash in on the growing HMO market. They can help them purchase and manage the property.
These mortgages cover up to 85 per cent of the property’s purchase price or value and will cover different HMO property types, including licensed and unlicensed HMOs, student housing, studio flats, and properties under housing placement contracts.
Some lenders require borrowers to provide proof of existing, lucrative rental income to qualify for a mortgage, while others have no minimum requirements.
With the HMO market booming, lenders can offer these mortgages as long as their minimum requirements are met. As a result, HMO mortgages can also be used for a range of unconventional property types.
Some property types include apartments above businesses, HMOs next to or above commercial properties, HMOs where the landlord also resides, and some new-build and leasehold properties. Although HMO mortgages may be available for these property types, consulting with a knowledgeable mortgage broker or lender is always in your best interest.
Lending Criteria for Interest-Only HMO Mortgages
There are many lenders and mortgage brokers offering interest-only HMO Mortgages, but not all will have the same minimum requirements.
Most of these financial entities have the ability and flexibility to cater to specific circumstances, and many of them have adopted some industry-standard lending criteria, which include interest-only payments, Bank of England or fixed rates, repayment periods from 3 to 30 years, first-time buyer or landlord applications, no maximum number of current properties, and no early repayment penalties.
Are Low Rates Available?
The general thought among landlords and residential investors is that the interest rates for HMO mortgages are exceedingly high. The truth is that Interest Only HMO Mortgages can be arranged with manageable, low interest rates and payment amounts.
Some HMO mortgages can be secured at a fixed rate of 3% for two years, then reduced by an additional 1% over the next three years. Some other benefits of HMO mortgages include a possible 60 per cent loan-to-value, or LTV, if the property is rented to a maximum of five tenants, either students or working professionals.
We partner with lenders to offer our clients the best rates and terms on interest-only HMO Mortgages, helping them purchase and manage their rental properties. If you are interested in applying for an Interest-Only HMO Mortgage or would like some additional information, our knowledgeable team is available to assist you.