Published 19 September 2012 · Last reviewed 6 April 2013 · Older article — see current rates
Solution for first-time buyer landlords who wish to purchase Houses In Multiple Occupation HMO.
Lender’s have traditionally been wary of properties of this type as they are let to more that oneindividual and thus eviction for repossession can be problematic, and when coupled with inexperienced first time buyer landlords it has been viewed as a poisonous cocktail.
In fact it is fair to say that raising finance on a HMO property with an outstanding track record is difficult enough. The usual stipulation is at least six months recent experience of running conventional self contained buy-to-lets or you will be shown the door by the lenders.
We have found this stance to be hard and unfair for first time buyers because the rental income potential on HMOs is usually greater and the risk is spread across multiple tenants meaning that total rental voids are unlikely. So we are delighted to have made the break through for common sense and with the help of our lender partners can offer a tailor-made HMO mortgage product that is open to first time buyer landlords for the first time in our history.
With every upside there is a downside: as in order to accommodate first-time buyer landlords the lenders’ have sought a greater reward, as they deem the lending to be a higher risk, and this premium is accounted for in the set up fees which are high, and as such this product is only for the would-be professional landlords are savvy and regimented enough to make the numbers work for them.
And, remember the interest and some associated fees may be able to be offset against tax and therefore for HMO properties that promise a good rental yield this product is certainly a viable option.
Payam Azadi is a partner at Niche Advice Ltd who are Independent Financial and Mortgage Advisers in London.