Large HMO Mortgage

What is a large HMO mortgage?

Many HMO lenders have a max lending cap at somewhere between £500,000 and £1m. There is no set rule for loans classed as a larger HMO mortgage but realistically £1m and above is the larger end of the scale. These mortgages can be used to purchase a new HMO, to remortgage or to repay HMO development finance.

Also, properties with eight or more letting rooms may be considered large meaning a specialist lender will be needed. We have lenders with no maximum loan size if the application meets affordability criteria and the LTV (Loan to Value) falls within lender limits.

As mortgage criteria differs from lender to lender, some will consider an HMO to be large and decline to lend, whereas some may not treat it any differently and be happy to provide a mortgage.

Large HMO property

An HMO property is thought to be large if it has eight or more tenants forming more than one household. If you’re thinking of buying this type of property, you will need to look at more specialist HMO mortgages.

Some specialist lenders do not put a limit on the number of bedrooms allowed, they will simply take a view on the application as a whole. They will mainly look at the client’s experience in letting HMO property, the property itself, location and the rental value.

We also deal with lenders who are willing to consider any kind of property, rather than a standard house or flat. If the building is considered to be suitable security for the loan, these lenders do not have a maximum number of bedrooms allowed.

A building such as a pub converted to an HMO could be considered large simply due to the type of property. It would be unusual for a first-time landlord to be considered for a large HMO mortgage, but not impossible. As a larger HMO would be harder to manage, a managing agent could be useful.

Things to consider

Here are a few things to take into consideration when looking to apply for an HMO mortgage – for more information you can contact our team of experts either online or by calling 01922 620008.

• What are your timescales?
  Assuming the valuation and legal work doesn’t take any longer to complete, the timescales from full application to completion will be the same.
• Do you have lettings experience?
  These types of properties are not really suited to first-time landlords or those lacking HMO experience. If you let a larger HMO to a company, you should be aware that if they cancel the tenancy and rent ceases, the mortgage still must be paid.
• Is property size an issue?
  We work with lenders who are willing to consider any kind of property. If the building is suitable, these lenders do not have a maximum number of bedrooms allowed.

Keep reading – Limited company HMO mortgages

What are the pros & cons of buying a large HMO?

The obvious pro is that a large number of letting rooms will generate a good rental income when fully let. Another pro is that if there rooms that are not let, voids aren’t as much of a financial issue if a number of rooms are still generating income.

Running a large HMO can be hard work though, this should be taken into consideration. There are a lot of complex issues that can arise, so care must be taken.

Which lenders will fund large HMO mortgages?

For larger and more complex properties, your application will usually best be managed through a specialist lender, or even a commercial mortgage lender.

These lenders will usually take a common-sense approach to assessing each application and look at the bigger picture. As such, you will benefit from more flexible criteria than you would usually expect on smaller, simpler properties.

What experience is needed to qualify for a large HMO mortgage?

As with any finance application, the lender will take a risk based approach and want to ensure that you will be able to maintain the monthly repayments. As such, the lender will look for details that prove your ability to manage the property that you’re looking to take on.

For refinance applications, the lender will usually be satisfied that you are already managing the property – where it is being well managed.

Experience doesn’t necessarily have to be management of HMOs, it could be commercial investment property, or a portfolio of residential buy to lets.

Who can apply?

We can fund applications for clients with diverse backgrounds and almost any current circumstances. We can accept applications from the following:

• Individuals
• Partnerships
• Ltd company HMO mortgages
• Expats
• Overseas applicants looking to invest in the UK property market