What we cover in this guide
- What are HMO mortgages?
- Read our Buy to Let guide
- Try our Buy to Let mortgage calculator
- What are the lending criteria for a HMO mortgage?
- Do I need a licence for a HMO?
- How many people can occupy a HMO?
- Can I get a Limited Company HMO mortgage?
- Can I get a secured loan on a HMO Property?
- How to get the best HMO mortgage rates
- Choosing the best HMO mortgage lender
- HMO mortgage broker
What are HMO mortgages?
A HMO mortgage requires an individual to take out a mortgage on a house of multiple occupancy (HMO). This property will then be let out to multiple individuals who aren’t related.
So, what classes a property as a HMO? They are commonly defined as a property in which a washing area, cooking area, or toilet is shared by three or more people. These people must be from two or more different households.
Typically, each household in a property will have a separate contract with the landlord. However, there are instances where a group of students might share a collective agreement with the landlord. Each occupant would individually sign, and the law would still view them as being four separate households.
HMOs can include shared houses, hostels, and shared worker accommodation. They are sometimes alternatively known as multi-lets or multi-unit properties.
Do I need a license for a HMO?
The Housing Acts obligate landlords of HMOs that are larger – with multiple tenants presenting a higher potential risk – to obtain a licence from the local authority. It’s mandatory for properties of three stories or more, where five or more occupants make up two or more households. You must be a ‘fit and proper person’ to obtain a licence. Authorities will also take your previous history as a landlord into consideration when reviewing your application.
On top of the mandatory requirements the Government set out, local authorities also impose their own requirements. For example, if HMOs in a geographical area have been shown to present a higher risk of fire.
How many people can occupy an HMO?
Some lenders will impose a limit according to their own criteria. In general, lenders will accept the maximum number of habitable rooms as five, although some will be prepared to accept more. Very few will have products with no upper limit at all, although these are not easily available.
Choosing the best HMO mortgage lender
HMO mortgages are a niche product within the market. So, it’s no surprise you won’t be able to pop into your high street lender and obtain a multi-let scheme.
Instead, there are a number of specialist lenders who cater to the requirements of landlords. Each have their own criteria for what properties fall into the HMO bracket and whether they will lend to them. It’s not unheard of for lenders to decline an application based on the number of storeys or rooms in a property.
Specialist mortgage lenders will also have varying lending limits, deposit requirements, and view on your track record as a landlord. It can be quite a labyrinthine task to find a lender with competitive rates and suitable terms for your circumstances. At The Mortgage Centres, we have a specialist team of brokers who are highly knowledgeable within this sector. They will be able to guide you through every step of the process to get the right product for you.