Are you looking to invest in a House of Multiple Occupancy (HMO) property? If so, you’ll need to secure financing through HMO mortgage lenders. HMO properties can be a lucrative investment opportunity, but they require a specialized type of financing. In this article, we’ll explore what HMO mortgages are, how they work, and the best lenders in the UK market.
What is an HMO Mortgage?
An HMO mortgage is a type of property loan that is specifically designed for investors who want to buy and finance a house that will be used as a House of Multiple Occupancy. HMOs are properties where multiple tenants rent individual rooms, and share common spaces like kitchens and bathrooms. Because HMOs are more complex than traditional buy-to-let properties, lenders look for specific criteria before approving an HMO mortgage.
How Do HMO Mortgages Work?
HMO mortgages are similar to traditional buy-to-let mortgages, but with some additional requirements. Lenders want to see that the property will generate enough rental income to cover the mortgage payments, and they’ll also want to know how many tenants will be living in the property. Generally, HMO lenders prefer to see at least three tenants, but some will accept two.
The amount you can borrow for an HMO mortgage will depend on the value of the property and the rental income it generates. Lenders will typically lend up to 75% of the property’s value, and some may consider lending up to 85% if you have a strong financial profile.
What are the Requirements for an HMO Mortgage?
To qualify for an HMO mortgage, you will need to meet the following criteria:
- The property must have at least three bedrooms
- The property must be let to at least three tenants
- The property must meet local council licensing requirements for HMOs
- You will need a deposit of at least 25% of the property’s value
- You will need to provide evidence of a strong rental income
Who are the Best HMO Mortgage Lenders?
There are several HMO mortgage lenders in the UK market, each with their own requirements and criteria. Here are some of the best HMO mortgage lenders:
Shawbrook Bank
Shawbrook Bank is a specialist lender that offers HMO mortgages up to 75% of the property’s value. They accept properties with at least five tenants and offer both fixed and variable rate mortgages. Shawbrook Bank also considers borrowers with a less-than-perfect credit history.
Kensington Mortgages
Kensington Mortgages is another specialist lender that offers HMO mortgages up to 75% of the property’s value. They accept properties with at least three tenants and offer both fixed and variable rate mortgages. Kensington Mortgages also considers borrowers with a less-than-perfect credit history.
The Mortgage Works
The Mortgage Works is a subsidiary of Nationwide Building Society that offers HMO mortgages up to 75% of the property’s value. They accept properties with at least four tenants and offer both fixed and variable rate mortgages. The Mortgage Works also has a range of other buy-to-let mortgage products.
Conclusion
If you’re looking to invest in an HMO property, you’ll need to secure financing through an HMO mortgage lender. HMO mortgages have specific criteria and requirements, so it’s important to work with a lender that specializes in these types of loans. Shawbrook Bank, Kensington Mortgages, and The Mortgage Works are all great options for HMO mortgage financing.