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Vincent Burch
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Mortgage Adviser
Mortgage Adviser

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HMO, Student-lets, Multi-lets, Ltd Co. – 75%, 80% & even 85% buy to let mortgages

Obtaining a HMO mortgage is as easy to obtain as a standard Buy to Let mortgage, but the knowledge of the lenders' criteria should be first sourced before the proposed rate is identified.

To help guide you through the finance available for this type of lending I have developed an area displaying the more common products from all the lenders extending HMO finance including Paragon, Kent Reliance, The Mortgage Works, Leeds Building Society, Aldermore, plus many more via http://www.vincentburch.co.uk/hmo-mortgage/index.html

You are now reading about HMO properties, this will probably be the best increase in any BTL rental yield that you can add.  Not a single let yielding at 4-8%, this does not pay you much more than covering the mortgage cost and for the same financial commitment you could be achieving 10% or even 25% rental yields.  

Because I quote HMO mortgage products typically on a daily basis for the professional landlord and I entertain the first time landlords I have experience across this entire buy to let HMO sector.  2012 was a great year for this type of funding because there was the money made available by lenders. Some had only entered mortgage lending within the previous couple of years, such as Kent Reliance who had a £400 million lending target for 2012.  The better news is still to come; these lenders’ lending target for 2013 have been increased and you may see some increased competition in the cost of this finance.  Such as Paragon doubling their targets for 2013 and to give them a head start in the New Year by offering free valuations for cases in December 2012.

The most common misconception I have from even the experienced investors is whether a property requires licensing and there no single rule - only a central government publicised guideline  The property might be on 1 floor, containing 3 tenants and licensing is mandatory by the local council.  And, I have completed mortgages where a property is tenanted by 6 people where no license of required.  The only place to find out whether a property requires licensing is to call the local town hall where the property is located, describe the property type, proposed tenants and they will tell you over the phone whether licensing is a requirement (including planning permission(s), if any).

There are 3 main elements to a HMO mortgage from the lender's point of view and I will cover each of these in three separate blogs; a) The property; type, location, value and whether a license is even required, Don't get too hang up on why lenders won't do things as very often one lenders no is another lenders yes and for no other reason than the way they are funded and maybe more importantly what their current exposures limits are in any particular area.  b) Tenants; how many, which would typically determine whether a HMO license is required and the tenant type.  Tenants are defined as 3 main categories; Working Professionals, Students and Social.  c) You - the proposed mortgagee and all the usual credit worthiness apply, by with some additional ones, such as buy to let experience, etc.

My job as an Adviser is to offer my clients’ the required finance but on the best terms available and not one lender has it all; if I have 5 calls in the same hour from different clients, there is a very high likeliness that 5 different mortgage products and even 5 different lenders altogether could be recommended which is all dependant on clients circumstances, the property types and the number of tenants, etc. 

I have 3 rules for anyone looking to arrange a HMO mortgage, any mortgage for that matter;
1. Don't pay more than you have to - this could be a broker fee, valuation fee, mortgage rate, administration fee and an independent broker can help you with this.
2. Make sure your advisers’ choices are not limited - most brokers work from a panel and unfortunately although they say can go off panel they can't or wouldn't, why else would they otherwise have a panel.
3. Never be sold blind, trust in your adviser but also know what and why you are being recommended a mortgage - get mortgage product details before you pay any money upfront (especially broker fees), including the mortgage lenders name, etc.

By Vincent Burch
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