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Do I need to get a new mortgage following the HMO licencing changes?

by

Richard Stokes niche advice

Do I need to get a new mortgage following the HMO licencing changes?

When do I have to obtain a HMO licence?
Normally you’re obliged to inform your Mortgage Lender of any significant material changes to the property or its tenancy arrangements. For example if the mortgage was taken out on the basis of a let to a single family and now it’s a Multi-let or House in Multiple Occupation (HMO) they could potentially insist you find an alternative lender.
On the 1st October the reclassification of HMOs took place. This has meant Landlords, particularly those with Multi-lets may have dropped into a new category of lending so their current Lender should be notified.
HMO Licencing Laws – October 2018

So what’s changed?
Old Rule: a HMO licence was only required when the property had 3 or more storeys and 5 or more tenants in one household, collectively sharing bathroom, toilet and kitchen.

New Rule: A house in multiple occupation (HMO) is defined as a property rented out by at least 3 people who are not from 1 ‘household’ (i.e. a family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’. If you want to rent out your property as a house in multiple occupation in England or Wales you must contact your council to check if you need a licence.
 
You must have a licence if you’re renting out a large HMO in England or Wales. Your property is defined as a large HMO if all of the following apply:
  • it is rented to 5 or more people who form more than 1 household
  • some or all tenants share toilet, bathroom or kitchen facilities
  • at least 1 tenant pays rent (or their employer pays it for them)
Even if your property is smaller and rented to fewer people, you may still need a licence depending on the area. Check with your council.

Why have HMO Licencing Laws changed?
The idea is new government rules will improve the standard of lettings in the UK.
It is anticipated that the changes will affect approximately 160,000 properties.
Rooms sleeping one adult must be at least 6.51 sqm, for two adults’ rooms must be no smaller than 10.22 sqm.

What could happen if Landlord’s fail to comply?
If the landlord fails to apply for a licence or temporary exemption by the 1 October, they will be committing a criminal offence.
The penalties for operating an unlicensed HMO can include prosecution or a financial penalty of up to £30,000.

How will my Mortgage Lender ever find out?
Well the onus is on you to declare the type of tenancy if it has changed since the original mortgage application. Going forward, there will be a centralised database for Mortgage Lenders validate licenses. The room dimensions may have also been captured by the Mortgage Lender in their original valuation of the property.

Which Mortgage Lenders allow HMO remortgages?
At Niche Advice we work with a range of Mortgage Lenders that offer HMO remortgages, including: Aldermore, Foundation Homeloans, Kent Reliance, Landbay, Leeds BS, LendInvest, Magellan Homeloans, Paragon, Precise, Shawbrook, Together Money, The Mortgage Lender and Vida Homeloans.

View example HMO Product

Niche Advice offers suitable advice to applicants looking to remortgage their buy-to-lets onto an HMO basis. To find out how we can help you please complete the Contact Form on our website or call T: 020 7993 2044.

Author: Richard Stokes

Richard Stokes is a partner at Niche Advice who are whole of the market Independent Finance Brokers In London. His role is very much focused on on Mortgage and Insurance products.
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