HMO Mortgage Case Studies

ABC Finance puts our customers ahead of all else, offering impartial advice and expert support on HMO mortgage applications. We maintain close relationships with an extensive panel of lenders to ensure we can offer you the best possible rates.

We specialise in HMO mortgages, and like to pass on that experience by helping borrowers. We created a HMO mortgage calculator, a series of HMO mortgage guides and break down the application process.

Of course, it’s always best to hear from the people that have benefited from our services first-hand. See below for a range of case studies focused on successful HMO mortgage applications.

Case Study 1 – Expanding an HMO Portfolio Through a Ltd Company

When our client made their initial enquiry, they already had two HMO mortgages to their name and had recently purchased a further HMO property through a newly formed limited company.

For the first limited company purchase, they had chosen to use their existing lender as they had a relationship with them. However, this turned out not to be the most suitable option for this investment.

The property

The new property was a mid-terraced house that was to be used as a five-bed HMO located just outside a city centre. It benefited from strong transport links to both the city itself and a nearby university.

Given the desirable location and the property being in a good state of repair, our client was confident that keeping it fully occupied for the majority of the time wouldn’t be an issue. This keeps the risk of rental voids to a minimum.

The finance

An HMO mortgage was required to fund the purchase. As they were buying through a limited company entity we had to choose a lender that would allow this. Of course, the client wanted the best rate possible and decided that a five-year fixed rate was the best course of action.

They also wanted a lender who would complete fairly quickly as this meant gains on their investment would begin sooner rather than later. We were informed that this wasn’t possible with the previous lender who had become slow and difficult to deal with.

The challenge

There were several factors involved that meant finding the perfect lender to match the client’s needs was challenging. Our client is a professional sportsperson meaning their employment is based on a fixed term contract of usually one year. In this profession, it can be common to change employers at the end of the contract but, of course, nothing is guaranteed. We needed a lender to take a sensible view on this.

Also, our client had historic adverse credit due to a disputed account. Although an agreement had been made and the account partially settled, the adverse credit was still shown on the file. Even with an explanation and evidence to show why there was a dispute, some lenders declined to lend based on both this and the employment, even though proof of a high income going back over five years was offered.

Given the earned income, the plan was to build the portfolio quickly with little fuss obtaining funding. We placed the client in contact with a specialist lender who had no issues with the adverse credit or the type of employment as they felt the overall application was strong. Furthermore, if our client wanted to purchase additional properties, this could be done easily and there was no limit to the number of HMOs they would fund for one applicant.

Finance terms

• Loan Amount – £112,500
• Property Valuation – £150,000
• Interest Rate – 4.85%
• Loan Term – 10 years
• Monthly Payment – £530
• Repayment Method – Interest Only
• Lender Arrangement Fee – 1.5%

Case Study 2 – Solving a Property Classification Dispute

Our client is a highly experienced businessperson and landlord who owns a number of properties around the London area. In addition to a portfolio of UK properties, they also have ownership of properties abroad.

This client is fastidious with the upkeep on all of their properties, which attract strong demand and, as such, provides the opportunity to select reliable tenants.

The property

A beautiful mid terraced three-storey period property which consists of six studio flats. This property was fairly unusual in that the units were largely separate, but still shared some facilities. As a result, the client was informed that the property required a HMO licence, which he had successfully applied for.

The finance

The client was rate-conscious and wanted to reduce the high interest rate that they were currently paying. In addition, they were also keen to raise additional funds, which would be used for additional property investment.

The funds were to be drawn down and held on account until the perfect property was found, allowing him to react quickly when an opportunity arose.

The challenge

Our client had an HMO licence but there were a couple of issues surrounding this. Firstly the license had expired due to the local council being so short staffed and behind with their paperwork. Secondly, the valuer classed the property as C4 (HMO up to six people) however the lender searched the council planning and found that it was actually showing as C3 (single family dwelling).

After a lot of investigation it was found that when the client purchased the property it was correctly classed as C3, the client then applied for the license when they converted it into an HMO for up to 12 people.

C4 classification was not in existence when the client purchased the property (nor would it have been applicable due to the amount of people in residence) therefore it was deemed “Sui Generis”. This lead to a lot of confusion and put the lender in a difficult position, unable to release funds unless they could be sure that the property was being used correctly.

This problem had to be closely managed, to ensure a solution could be reached that would allow the lender to release funds. Constant liaison between the surveyor, lender, council and client had to be managed to ensure the problem was resolved before the mortgage offer expired.

This was successfully managed by our team, which allowed the client to complete their application and continue with plans for further property investment.

Finance terms

• Loan Amount – £1,175,000
• Combined Valuation – £2,200,000
• Rate – 5 year fixed at 4.53%
• Term – 10 years
• Monthly Payment – £4,491.07
• Repayment Method – Interest Only
• Lender Arrangement Fee – 1.5%