This information should not be interpreted as financial, tax or legal advice. Mortgage and loan rates are subject to change.
Category: hmo
When looking to secure a mortgage for an HMO (House of Multiple Occupancy), the deposit required typically ranges from 25% to 40% of the property’s purchase price, but it can be from 15%-20%, depending on the type of property you are investing in.
In this guide we explain how deposits vary and how you could borrow 100% of the purchase price, if you do not have cash savings for a deposit.
Size of property
The deposit requirement can vary based on the size of the HMO property you’re purchasing.
For example, a standard property being let as a house of multiple occupation – with three to five bedrooms – may be eligible for a standard buy to let mortgage. If that is the case, a deposit can start from as little as 15-20% of the property value. However, you will more typically need a deposit of at least 25%.
A large HMO – with six or more bedrooms – will require a specialist HMO mortgage, where deposits are from 25% and up. The reason for this is that larger HMO properties pose a greater risk for lenders.
100% HMO mortgage borrowing
If you cannot raise a cash deposit, but you own other property (either your home or rental property) and have adequate equity, you may be able to use the equity as security to raise a deposit to buy your HMO property.
This is a technique you can consider to raise any property deposit, but is just as applicable for an HMO as any other.
Lender criteria
Different lenders have different criteria when assessing HMO mortgages. Some may require a larger deposit to mitigate risk, while others may offer more flexibility, especially if the property has strong rental potential.
While your deposit is an important factor in being able to get a mortgage, the rent the property can achieve is also important, and the best deal you can achieve will need to consider different lender’s criteria to make sure you will be accepted.
Licencing and compliance
With an HMO, there are always going to be minimum stipulations on things like bedroom size and health and safety requirements.
Properties must comply with local licencing requirements and safety standards to be accepted by lenders. Ensuring your HMO is up to these standards is important for the property’s legal standing, as well as your mortgage terms.
Working with a broker can make life a lot easier
If you work with Commercial Trust, your expert mortgage advisor will be on hand to guide you through the application process, helping you to secure an HMO mortgage with the best deposit terms available.
They will take down all your details and check them against lender criteria to find a mortgage your case fits with, and amongst those that do, which one will be the most cost effective, depending on what you want from the mortgage.
For example, if you want to keep the monthly cost as low as possible, they will work out which lender product will achieve that. Whereas, if you want the biggest loan amount you can get, even if the monthly cost is higher, they will find lenders who can offer you the biggest loan, then work out which of those products are cheapest per month.
Contact our team today so they can take all the stress and bother off your shoulders and get an application underway for you. For fastest service, call us, or you can talk to us via live chat or get started online.
