HMOs without licenses are not eligible for a mortgage. Lenders might instead offer you a buy to rent mortgage.
Why invest in HMOs? HMOs are more profitable than regular rental properties. But what are they and how do you finance them? A House of Multiple Occupation is a property in which three or more people share a bathroom or kitchen and they are not related. Each property must have a HMO license from the local authority to ensure they comply with regulatory standards. These homes, also known as house-shares, are popular with young professionals and students. Rent is usually more affordable than small apartments or studios. An HMO is a great investment for landlords and property investors. Multiple bedsits typically yield higher rental yields than a stand-alone buy to let.
HMO mortgages may only be available to experienced landlords. Lenders will not accept applications from anyone who has been a landlord for two years or more and/or has experience in HMO leasing. Additional requirements may be required by lenders. A HMO mortgage will not be approved for a first-time landlord. Instead, you'll need to rent a property to one household.
HMO mortgage lenders are likely to take your rental income into account. This can help to increase your mortgage limit. HMO mortgages could be offered at tracker or variable rates. LTV rates generally start at 80% LTV. More attractive rates can be offered with higher deposits or lower LTV ratios.
A traditional property to buy and let would normally accommodate one person or a whole family. Renters would pay a single rent payment, either weekly or monthly. The household would also be responsible for paying the utility bills. These are sometimes referred to as "singlelets".
It is common for shared areas to be 'left' as no one wants another's mess. Sometimes landlords have to clean their properties or hire cleaners.
What is a HMO, exactly? What is a house in multiple occupation? A standard HMO can be run by a landlord with no more than four people. HMOs require different mortgage requirements than buy to let mortgages for entire-property tenancies.