A large deposit is required for an HMO mortgage. LTV ratios between 60% and 75% are required by most lenders (i.e. Minimum 25% deposit While lenders may consider potential rental income in their stress test calculations, they will usually base their sums based on the rental income that you would get from renting the property to one household and not individuals. The mortgage must be affordable to you, and have large margins. A mortgage broker can help you determine how large an HMO mortgage mortgage you can afford according to your lender.
HMOs are often restricted to specific areas. HMOs, for example, are designed to target certain tenants such as single professionals or students. An HMO's location is often restricted to central locations, or areas with easy access to bus routes and other amenities. It would be absurd to have an HMO in a remote location in the middle or even in the middle of nowhere.
HMOs: Why would you want to invest in them? - Higher rental income. You might expect to get roughly double the rent. You can rent a four-bedroom house to one family for PS800 a month. Four tenants would pay PS400 a monthly each. Rent inclusive of bills may be a way to attract tenants. This will increase your costs.
HMOs may be restricted to a specific area. HMOs target specific tenants, such students or single professionals. HMOs are typically located in urban centers or other areas that have easy access to public transport and other amenities. It would be unwise to locate an HMO somewhere in the middle if it was in a rural setting.
Mortgages to buy-to-let are often less expensive in terms of fees and rates. There are also more lenders offering them. Because the criteria isn't as stringent, they are easier to get. An HMO will often make additional profit on top of the mortgage.
Before you make an investment, talk to your local HMO licensing office. Make sure you are familiar with your local licensing requirements and definitions. They may include minimum living and kitchen space sizes, kitchen facilities, toilet numbers, showers or baths, fire-pit equipment, etc.
What is an HMO? A house in multiple occupancy (HMO) refers to a property that has shared facilities like bathrooms and kitchens. It is usually rented out to three or four people, but not as a "household". A licence is not required to operate a standard HMO that has four or fewer tenants. However, HMOs have different requirements than buy-to-let mortgages that are used for whole-property rentals.