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.
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.
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.
In assessing the HMO's value, lenders might consider your rental income. This is especially useful if you are trying to withdraw equity or have converted the property.
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.
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.
Your HMO may not require a license. This could make it unsuitable for an HMO mortgage. Therefore, lenders may only offer you a mortgage to buy and let.