HMO mortgages take the same amount for lenders to process as any other buy-to-let mortgage. Each case is different. Pre-pandemic it would take three to four months to receive a purchase offer, and another four to six weeks to complete.
HMO Valuations- Lender methods can vary when it comes to valuations. Some lenders combine traditional surveyor inspection with comparing it with like-for-like properties in the same region. If there are no HMOs within the area, then the valuation is based upon the amount achieved as if it was a single household. The method doesn't take into account the extra income HMOs typically attract through multiple rental incomes. This can limit the amount you are able to borrow.
Lenders might accept evidence that you have applied for an HMO license in place of the actual licence. This is because it can take longer and may not always be practical. You may be considered 'fit and proper to operate an HMO if you have the licence. However, it is a good idea to have the license readily available in order to facilitate the application stage underwriting.
HMO mortgage lenders will typically take rental income into consideration. This can dramatically increase the mortgage amount. HMO mortgages can offer variable and tracker rates. LTV rates are usually set at 80% LTV. Rates that offer attractive rates come with higher deposits and lower LTVs.
A House in Multiple Occupation is more profitable than traditional buy-to-let. The UK has a high rental demand and landlords can maximize their rental yields by using low-interest rates. The key to maximising your rental income is securing the right 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).
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.