HMO stands for “Houses in Multiple Occupation”. In laymen’s terms, this is a renting policy where at least 3 tenants share a living space like a house or an apartment. These 3 tenants must not be from the same household otherwise it wouldn’t be an HMO. Also, less than 3 tenants would also not be considered a part of HMO.
A household may include from a single person to a family. People are turning over to HMO property because for tenants, the rent becomes quite affordable and for landlords, the yields are pretty great.
What is an HMO Mortgage?
Ordinary Mortgage terms and conditions don’t allow the owner or the landlord of the property to rent out a building to multiple tenancies. If you do that, your mortgage owner holds the right to take back the mortgage. You also might not be able to do business with that particular vendor.
This is where HMO mortgages come into play. HMO mortgages allow you to rent out your property to multiple tenants under the specified terms and conditions of the HMO mortgage. You have total right to let your property to whoever you want to.
Types of HMO Mortgage:
There are basically 3 types of HMO mortgages that you can get. This classification is based on the current build state of your HMO lending building. You can get the following HMO Loans
- HMO Development Loan: If you plan on building a massive HMO construction project then you can get the HMO development loan. The vendor who are giving you the load would first need to see the construction site for value estimation and whether it is eligible for the loan or not.
- HMO Refurbishment Mortgages: If you are planning on renovating your HMO place then you can get the HMO Refurbishment loan. This loan is for small scale projects and you can get it on fairly reasonable terms and conditions
- HMO Mortgages and Remortgages: If you have an existing HMO property and you want to build on top of that then you can get HMO Remortgages. This is possible for both small scale as well as he large scale HMO to-let properties.
Difference between HMO Mortgages vs Ordinary BTL Mortgages:
There is not much difference between HMO mortgages and simple mortgages. There only key points worth mentioning are these… HMO mortgages allow multiple tenancies where Ordinary Mortgages do not.
Also, the average loan processing time for HMO mortgages is a little bit longer than that of ordinary mortgages. You can get an ordinary BTL mortgage in between 1 to 4 weeks. If you want an HMO mortgage then you might have to wait for about 2 to 4 weeks. This is because of the inclusion of multiple tenancies in the HMO mortgage agreement.
As a beginner landlord looking for HMO loan for their rented property, this is HMO mortgages Ultimate Guide that all you need to know about HMO mortgages. For further details about the ins and outs of HMO mortgage, visit HMO Mortgage Broker UK.