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If you want to become an HMO landlord, then you may have to apply to the local authority for a license. If the property that you want to rent out has more than three bedrooms or more than five people occupy it, then you have to register it with the local authority, under current rules.
It’s essential to have a license in place before you apply for a mortgage, although some lenders may proceed with proof you have applied for a license. Some lenders will refuse to provide a loan if they can’t see evidence you’re able to rent out the property to multiple people.
Because of the perceived increased risk of lending on the HMO market, many mortgage lenders charge a higher rate than the standard mortgage market. Paying more interest naturally makes HMO mortgages more expensive.
Furthermore, you often have to put down a bigger deposit. Most lenders offer a maximum loan-to-value rate of between 65 and 75 per cent meaning that they will only provide you with a maximum of 75 per cent of the value of the property in the form of a mortgage – the other 25 per cent, you’ll need to pay yourself.
At Ascot Mortgages, we specialise in helping people find the right HMO mortgage for what they want to achieve.
Remortgaging is applied when you keep
living in your present property while applying for another mortgage deal with a new lender. Before finding out how to remortgage and get the best offers from experts like Ascot Mortgages, you have to check meeting what parameters of the deal that can help you succeed the most. The range of background factors varies a lot — from the recently changed loan-to-value ratio or your existing agreement coming to an end.
Whether you are trying to get a more beneficial deal or searching for funding to improve your home conditions, remortgaging is one of the most advantageous scenarios to consider.
If looking to convert a property to a HMO you will generally be looking at alternative temporary finance such as Bridging Finance to complete the conversion prior to be able to obtain a mortgage on the property. A HMO mortgage can be used to purchase a property that is already setup as a HMO or sometimes if it just requires minor refurbishment works.
Lenders typically assess the rental income potential of HMO properties based on the potential rental income from each individual room, rather than the property as a whole. They often require a projection or evidence of the potential rental income, which can be supported by local comparable rents or, in the case of an existing HMO, previous rental income records.
The interest rates and fees for HMO mortgages can be higher than standard residential mortgages due to the perceived increased risks associated with HMO properties. Rates and fees can vary widely based on the lender, the applicant’s financial situation, and the specifics of the property. It’s always recommended to compare various lenders and seek professional advice to get the most suitable deal.
Yes, most lenders offer HMO mortgages for properties across the UK. However, some lenders may have restrictions or different terms based on the property’s location, particularly if it’s in an area with an abundance or oversaturation of HMOs. It’s essential to check with individual lenders or use a mortgage broker familiar with the HMO market in your desired area.