Securing the right HMO mortgage for you
Managing an HMO is more complex than a standard buy-to-let. Lenders criteria tend to vary hugely and, as such, finding the best one for your circumstances can become difficult.
The choice to apply through a reputable HMO mortgage broker or go directly to lenders is an important one. By having an initial chat with us, you will receive a whole-of-market view and get free, impartial advice. This will give you a good idea of the rates you will be able to achieve based on your situation.
Applying doesn’t have to be a hassle. Although searching the market can be tough, working closely with ABC Finance Ltd can make the process far simpler. As your portfolio evolves, the right lenders for you will also change. Building a relationship with a trusted advisor can save a lot of time in the long run.
Can I apply for an HMO remortgage?
Yes, depending of course on a few factors. The new lender will look at your credit history, affordability, the reason for refinancing and the LTV (Loan to Value) ratio.
You may be looking for a better interest rate, raising funds for debt consolidation or to increase your portfolio. If you are refinancing an existing debt, it is crucial to check if you have any ERCs (Early Repayment Charges).
Raising capital to invest in additional property will not be an issue in most cases and some lenders will help fund the new purchase at the same time which can make the process simpler.
Should I use an HMO mortgage broker?
This is really down to personal choice. The clear advantage to using a specialist broker is that they know the market and will be able to find you a suitable product quickly.
Knowledge of the market is key as HMO criteria will differ between lenders. A good broker will have strong contacts across numerous HMO lenders This means a quick yes or no from each of your choices can be achieved without the slog of contacting everyone yourself.
In summary, using an HMO mortgage broker will not only save you time but will also provide you with the best rates available. Be aware that some do charge fees as well as receiving a payment from the lender.
Generally, we don’t charge a broker fee on loans over £150,000. This can be considered individually on smaller loans.
Should i choose a fixed or variable rate?
The decision between fixed or variable rates is a key one when taking out a new HMO mortgage. It’s not always the simplest choice, but the first stage is fully understanding how each product works:
Fixed rates offer certainty of your costs over the fixed rate period, usually 2 to 5 years. During this period, the interest will not move when the Bank of England Base Rate, LIBOR or lenders variable rates move.
When the fixed rate expires, you will usually revert to the lender variable rate, unless you choose a new fixed rate.
This is the key benefit of these products, although it can work against you if interest rates drop. Where rates increase, you will usually pay less than you would have on a variable product. Where rates drop during your fixed rate period, you may end up paying more than you could have.
During your fixed rate period, you will usually have early repayment charges, meaning you must pay an exit fee – usually 2-5% of the loan – if you repay the loan.
These products can be broken down into variable rates, base rate trackers and LIBOR linked products. The difference comes down to what interest rate the mortgage is linked to.
Variable rates can increase or decrease from the day the mortgage is set up, meaning your monthly payments could change.
These products work in the opposite way to fixed rates, you will benefit when rates drop and pay more when rates rise.
Which product should I choose?
The answer to this question is not simple, there is no right answer. If you value certainty of your monthly costs, or feel that rates will rise, you should consider fixed rate..
Of course, if you end up paying more for your fixed rate, you should consider this alongside how much you expect rates to increase.