The present economic climate is on target for launching a flourishing HMO business. But what is an HMO (Houses of Multiple occupancy)? An HMO is classified as a property rented out by three or more people from multiple households (like a shared student property). When the property is let to more than five people, it is referred to as a large HMO. HMO’s can be a desirable option for generating a secure income and an excellent rate of return on your investment.
Three Good Reasons Why Now Is The Perfect Time To Start An HMO Business:
- The demand for reasonable housing is rising.
- The cost of borrowing is not high.
- Property prices are bound to go up again.
Besides, specific tax changes are making it more advantageous for landlords to establish professional HMO businesses today.
How Can You Qualify For An HMO Mortgage?
Many lenders have a preference for borrowers that already have experience as a landlord before they will consider an applicant that is applying for an HMO mortgage. Only a limited amount of lenders will accept applicants with no landlord experience. They will also ask whether you intend on managing the property or if you’ll be using an agent. Most purchase to let lenders, including the ones who offer HMO mortgages, can only be contacted via a broker. You can also view this HMO Mortgages Ultimate Guide to obtain more detailed information. Once you have decided on a broker, they’ll be asking you plenty of questions so that they can match your circumstances with the right mortgage and lender.
These Are Some Of The Questions You Can Expect:
- The amount of letting rooms.
- The location.
- If you have experience as a landlord, and also HMO experience.
- Whether you’ll be doing the managing of the property or a managing agent.
- Whether the property already has or requires a license.
- Expected or verifiable income.
- If one or multiple AST agreements exist.
- The type of tenants.
- The amount that you want to borrow.
- The type of rate you require (fixed or tracker).
- Your present credit rating.
- Borrowing vehicle (using a limited company or buying personally).
Processing Times Of An HMO Mortgage
The process will take more or less the same amount of time as other types of applications. The average time it typically takes from opening the case, submitting the application to finalization if presently 96 days. Some lenders may be quicker, while others may be slower. It is dependent on the complexity of an application. Most lenders will want to know if the property is licensed. If not, but you’ve already applied for a license, most lenders will make it a precondition that you are believed to be fit and proper to manage an HMO.
What To Do Next When You Require Financing For An HMO?
Finding the appropriate finance for an HMO can be a comprehensive business. The points mentioned above are just the primary deliberations to think about. All lenders have unique quirks, therefore its best to get in contact with the right broker to talk you through the choices that may work best for you.
