HMO Mortgage Advice

The housing acts require that certain types of Houses of Multiple Occupancy (HMOs) – specifically larger properties with multiple tenants that potentially present higher risk – be licensed by the local authority. Mandatory licensing applies to properties with at least three stories, with five or more occupants making up at least two households. To obtain a licence you must be a “fit and proper person” – your previous track record as a landlord will be taken into account when considering your licence application.

In addition to the mandatory licensing requirements laid out by central government, local councils also have the authority to set down “additional licensing” criteria that require other types of HMO to be licensed. Additional licensing requirements can be introduced by local authorities if, for example, HMOs of a certain type or in a certain geographical area have been shown to have a greater fire risk.

If you are looking to operate an HMO, it’s important to check with your local council whether a licence if required; failing to obtain a licence where necessary is a criminal offence and can result in fines of up to £20,000 in England and Wales, and up to £50,000 in Scotland.

With definitions of what constitutes an HMO varying from one local authority to the next, and many lenders also taking a different view on the definition of a House Of Multiple Occupancy, it’s no wonder that tenants and homeowners can sometimes be confused about who is able to live in an HMO, or not.

For a house to be an HMO, there needs to generally be three or more people living there and sharing the facilities, who are not related to each other and who do not own the property. The shared facilities would be the kitchen, bathroom, stairs and designated communal areas. There are no rules stating exactly who can or can’t live in an HMO, but generally you would expect tenants to be adults, with any minors being accompanied by an adult as part of a family unit. Typically, tenants are students living away from the family home, professionals who want to live close to work but do not want to buy or rent a whole house or flat.

Many people ask if a landlord can live in an HMO. In the case of a standard Buy-to-Let mortgage, you are not allowed to use the property as your place of residence while renting it to others – the product is geared towards the whole house being used as a source of revenue. However, if you are living in your home and decide to rent out spare rooms to non-family members, your house will generally become an HMO if you take on more than two lodgers or tenants, and you will be required to meet the appropriate HMO standards for quality and safety, as enforced by your local council. If in doubt, always check rules locally.

With the changes in tax allowances and a variety of new laws being introduced for landlords, two areas that have seen significant growth within the sector when looking at the buy to market as a whole are Limited Company buy-to-lets and Houses of Multiple Occupancy (HMOs). Therefore, it is perhaps of no great surprise to see the demand for a combination of the two increase, with the levels of enquiries from people on the rise asking the question, can I get a Ltd Co HMO Mortgage.

In short, the simple answer is yes. Albeit this is perhaps one of the most growing areas of the Buy to Let market there are however still restrictions that apply with how many lenders will consider it. HMO Mortgages are much less available than standard single dwelling buy to lets however with greater choice of lenders offering limited company buy to lets it is likely that if a lender considers lending on HMO properties that they will also permit this via a Limited Company.

Our Buy-to-Let Brokers have specific training and knowledge of this sector and therefore if you are considering this as an option or indeed are a seasoned Ltd Co Buy-to-Let Investor, we are confident that you will receive the best advise available.

There may come a time that you wish to consider raising some additional funds against an HMO property that your own.  This could be for a variety of reasons such as but not limited to:

• Home improvements
• Assist with the purchase of another property
• Debt consolidation

Typically the first consideration will be to enquire with the current mortgage provider on the property or as a new Remortgage however, this is not always possible or indeed may not be the best solution at the time. Therefore, an alternative option may be a secured loan.

Secured loans are available for HMO properties and typically in the same way as with other Buy-to-Let Secured Loans. Secured loans are a popular form of borrowing for landlords as on many occasions it is possible to borrow more than that which a standard mortgage can provide thus maximising their borrowing potential.

Rates and fees can on many occasions be higher than that of a standard mortgage so do ensure you carry out your research wisely and take all options into consideration.  We have access to HMO Mortgage Experts so if looking to obtain some professional advice please drop us a line for your no obligation enquiry.