Typically referred to as a HMO, HMO is an abbreviation for House in Multiple Occupation. This is a house that is occupied by multiple tenants or residents. An HMO will allow landlords to rent the property to multiple people, or multiple households rather than a single household.
HMO Mortgages Wirral
Over the last couple of years we have noticed an increase in clients applying for HMO mortgages. More and more properties are being let out as HMO properties than ever before. But, do you really need a HMO mortgage or is a buy-to-let mortgage sufficient for your needs?
You may have seen on numerous property programmes on TV, a House in Multiple Occupation (HMO) can be more lucrative, when compared to a traditional buy-to-let. Demand is high throughout the UK for rental properties and landlords are well aware of ways to maximise rental yields. However, ensuring you have the right mortgage is essential to utilising the profits made from rental income.
HMO vs Buy-to-Let?
In terms of a buy-to-let property, one rent would be due from the household on a weekly/monthly basis. The property would typically accommodate one family or person. The family/person would also pay the utility bills. These can often be referred to as ‘single-lets’.
Below you will see a monetary example of why a HMO property can be more popular than a buy-to-let:
Traditional buy to let
4 bedroom semi-detached house in Wallasey with 2 reception rooms
Rented to a person/family
Monthly rental income = £650
Annual rental income = £7,800
HMO buy to let
4 bedroom semi-detached house with 2 reception rooms in Wallasey
1 reception room converted to a bedroom
Rented to 5 single working professionals
Monthly rental income per tenant = £400
Monthly rental income = £1,750
Annual rental income = £21,000
As you can see above, a HMO property can be more profitable than a standard buy-to-let.
HMO Mortgage Criteria
A large majority of HMO lenders will insist upon landlords having experience in letting property. There are very few lenders that consider new landlords without any previous letting experience.
However, this usually results in the rates being slightly higher, as the lender consider you a slightly higher risk. Some lenders will also insist upon a letting agency managing the property rather than managing it on your own.
Despite being very popular, HMO mortgages are still very much a niche product type. The application for a HMO mortgage can be very comprehensive compared to a standard buy-to-let mortgage.
Will you need an HMO licence?
Not every HMO will require a licence. It depends on the size and logistics of the property and tenants. It also depends on the terms and conditions of each local council. Larger operations will usually require licences. You can apply for a licence by visiting the government website.
Book Your FREE Appointment
You may not know which is the right type of mortgage, a HMO or a traditional buy-to-let, we can help. Simply book your FREE appointment and we can find the perfect option for you.