A house in multiple occupation (commonly abbreviated to “HMO”) is a property that is home to multiple occupants. Three or more unrelated occupants will share common spaces such as bathrooms and kitchens, but will usually have their own individual bedroom. HMOs are popular choices for young professionals who would otherwise struggle to afford rent prices in major cities alone, as well as students during their university terms.
If you are interested in pursuing an HMO as part of your buy-to-let portfolio, you will usually hit a few snags along the way. Firstly, new legislation – set to commence on October 1st 2018 – dictates that HMOs of five or more occupants, making up two or more households, will have to be officially licensed. This is a change from previous licensing requirements, which only applied to properties over three stories. There will also be minimum expectations for individual bedroom size. If you are planning on purchasing a large HMO, you will need to take account of these legislative changes and apply for licensing.
Secondly, financing for HMOs is generally considered to be more difficult to obtain than financing for a standard buy-to-let. However, there are options – and we’ve put together a few of the best broker options currently available for you to consider.
Lending Expert are online credit brokers who work with a wide range of master brokers and lenders. Their experts can compare HMO mortgages to find you a deal that matches what you need. Their brokers have access to the whole of the market including all mainstream lenders, second charge and some off-market exclusive rates via their lender panel.
Fair Mortgages offer a range of different HMO mortgages from high street brands such as NatWest, Post Office, and Virgin Money. Many of their offers have low introductory fixed rates, and the fees are below £2,000 for their best deals.
The Buy to Let Broker
As the name suggests, this broker specialises in buy-to-let mortgages, and their range of HMO mortgage products is well worth considering. They have a number of products with very low fixed pay rates – such as 1.44%. They are happy to accept first time landlords, and though the arrangement fees can be vastly different to one another – £999 up to £2,499 – these are in line with the industry standards.
This broker splits their available mortgage products down into percentages, with different deals available for those wishing to obtain a 65% mortgage, and 70% mortgage, and so on and so forth. Fixed rates for two years are available from as little as 1.44%, and the arrangement fees – which are either fixed or calculated on a percentage of the mortgage cost – are reasonable.
SBI UK offer a range of different products that are suitable for most budgets, ranging from £100,000 up to £3,000,000. However, you can only borrow up to 70% of the property value, which may be restrictive if you are entering into the HMO buy-to-let market for the first time. If 70% is sufficient for your purposes, there are plenty of offers worth considering at SBI UK: fixed rates are available for 3.44% for three years, and the arrangement fee is – in almost all cases – 1.25%.
HMO buy-to-let options can be more restrictive than standard buy-to-let mortgages, but the options above should provide you with a promising start to achieving a well-financed and profitable HMO property portfolio.