A House in Multiple Occupation is a property that is rented out to multiple tenants. These tenants may share common facilities like a kitchen or bathroom. An HMO allows landlords the flexibility to rent multiple properties to tenants, rather than renting a single property to one household.
HMO mortgage rates are typically higher than the standard buy-to let mortgage products. HMO mortgage markets are less competitive due to fewer lenders. HMO mortgage lenders may charge slightly more for loans and higher rates than those that would be willing to lend. The income from an HMO should not be less than what is needed to cover a mortgage and utilities bills, as well as maintenance.
HMO mortgage lenders may also require information about the property. Some require that the property only have one kitchen or that tenants can share a common area. Other requirements include a limit on the number of floors and bedrooms, as well as limiting how many bathrooms and other restrictions. A lender must also agree to allow you to renovate the property before you rent it. A mortgage broker can help navigate through all of these restrictions to help you find a willing lender.
HMO licenses issued by local authorities are valid for five consecutive years if approved. HMO licences must be provided for each property. A landlord might have three HMO properties. Each HMO will require a license.
What is HMO finance? - An HMO mortgage is a type of mortgage specifically for landlords who want to rent out their property to more than three tenants who aren't from one household.23 Mar 2022
However, this does give unlicensed HMOs a negative connotation. It suggests that they are illegal or "fly-by-night". These smaller HMOs are often referred to by local authorities, lenders, and owners as multi-lets, "HMOS not Required To Be Licensed", or "nonlicensable MMOs".