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
HMO lenders will take into account the potential knock-on effects of higher mortgage risks on your ability pay the mortgage. The interest rates are currently at about 3%, compared with 1.7-1.8% for single-tenancy BTL.
A HMO mortgage lender will also take into consideration your rental income. This can greatly increase the amount of mortgage available. HMO mortgages may be offered at variable or tracker rates. LTV rates start at 80% LTV. Lower deposits and higher LTV ratios lead to more attractive rates.
An HMO is a better option for landlords than letting to families. You will be able charge per room individually and thus charge more overall. To do this, you will need a specialist mortgage.
HMO mortgages were offered by 27 lenders, 23 to Limited Companies, and 23 to Individual applicants at the time. HMO mortgage rates can be more expensive than traditional buy to lets because they are a specialist type of property. This sector is more competitive than ever thanks to the increased competition. Rates are now starting at 1.64% and going up to 2.69% in Limited Companies.
These potential benefits come with higher risks. It's more likely that you will have a higher turnover than traditional buy-to -let tenants. And every additional tenant is another unknown (e.g. They will pay the rent. Are they causing damage? They can cause legal disputes. You will also require a specialist mortgage.
The demand for affordable rental accommodation is strong as the rising cost of purchasing a home makes it difficult to afford one. To assess the demand from potential tenants, check local listing sites (Gumtree. Zoopla. Rightmove ).