HMO mortgages are a unique borrowing situation that covers residential investors or landlords looking to purchase properties known as Homes in Multiple Occupancy. Homes in Multiple
Occupancy, also called bedsits, are residential properties that are inhabited by multiple tenants who share a certain number of common areas, such as the bathroom, kitchen and/or living room.
These types of properties are most often rented out by college students or young professionals who need affordable living 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 and can help them to purchase and manage the property.
These mortgages cover up to 85 percent 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 the borrower to provide record of existing, lucrative rental income in order to qualify for the mortgage while other lenders have no minimum requirements.
With the HMO market booming, lenders are willing and able to offer these mortgages as long as their minimum requirements are met. Because of this, HMO mortgages can also be used for a number of unconventional property types.
Some of these property types include apartments above businesses, HMOs next to or above commercial properties, HMOs where the landlord also resides, some new-build and leasehold properties. Although HMO mortgages may be available for these property types, it is always in your best interest to consult with a knowledgeable mortgage broker or lender.
Lending Criteria for Interest Only HMO Mortgages
There are a large number of lenders and mortgage brokers available to provide interest-only HMO Mortgages, but not all of them will have the same minimum requirements that must be met.
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 landlords 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 with a fixed rate of three per cent over a two-year period, which can then be reduced by an additional one per cent 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 for interest-only HMO Mortgages to help 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.
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