hmo mortgage interest only
HMOs that don't require licenses may not be eligible for an HMO loan. Therefore, some lenders might only give you a buy-to-let mortgage.
HMO mortgages may be needed if your property is rented to more tenants than one tenant from different households. This is because the HMO mortgages are not designed for single-household tenants and won't allow you to qualify for regular buy to rent mortgages. If you do take a regular mortgage for an HMO property you could be violating the terms of the mortgage, which could result in lenders taking legal action.
HMOs can be restricted to certain areas. HMOs can be targeted at specific tenants such students and single professionals. HMOs are often located in central areas or near major bus routes and amenities. It would be pointless to have an HMO located in a rural area in the middle-of-nowhere.
HMOs that don't require licenses may not be eligible for an HMO loan. Therefore, some lenders might only give you a buy-to-let mortgage.
HMO Valuations. Lender methods may differ in this area. Some lenders use the traditional surveyor inspection in combination with comparing it to other properties in the region. If there arenŐt any HMOs, the valuation will reflect the propertyŐs value as if it were a single house. However, this method doesnŐt account for HMOs that have multiple rental incomes. Therefore, it limits your borrowing options.
An HMO will not be valued by every lender based on rental income. Instead, the lender will consider the HMO to be a standard home. This could limit the amount that you can borrow, which is counterproductive to the purpose of an HMO mortgage.
An HMO mortgage will require a large deposit. LTV ratios must be between 60% to 75% for most lenders. A minimum of 25% deposit. Lenders will consider rental income when calculating their stress tests. However, they will base their calculations on the rental income from renting the property to one household. Your mortgage should be affordable and with large margins. A mortgage broker will be able to advise you as to how much an HMO mortgage is possible for you (according to your lender).
After gaining some experience with letting properties, you might be ready for letting out HMOs. Either you convert an existing property to an HMO (or buy a brand new one), but in either case, you will need an HMO mortgage. You will need to contact your lender again if you are already a homeowner with an ordinary mortgage to buy a property.