What is a Multiple Occupancy mortgage?
A House of Multiple Occupancy (HMO) is a property where three or more people from two or more households share a washing or cooking area, or a toilet.
A ‘household’ could be a family, couple, or a single person within a single unit of the property. In an HMO, each household typically has a separate tenancy agreement with the landlord, although there are exceptions. For example, four students sharing a house might have a single overall tenancy agreement, but they would still be considered as four separate households under the law.
Other examples of HMOs include shared houses, hostels, and shared worker accommodation, which may also be referred to as multi-lets or multi-unit properties.
A ‘household’ could be a family, couple, or a single person within a single unit of the property. In an HMO, each household typically has a separate tenancy agreement with the landlord, although there are exceptions. For example, four students sharing a house might have a single overall tenancy agreement, but they would still be considered as four separate households under the law.
Other examples of HMOs include shared houses, hostels, and shared worker accommodation, which may also be referred to as multi-lets or multi-unit properties.
Can you outline the requirements for an HMO mortgage?
The requirements for obtaining an HMO mortgage can vary significantly among lenders, but the basic principles are similar to those of a traditional mortgage. However, there are some notable differences that lenders typically apply to HMO mortgages. Some common aspects of HMO criteria include:
- Experience: Most HMO mortgage lenders prefer applicants with at least a year of property management experience and may not work with first-time buyers or landlords.
- Occupancy: Lenders usually have a maximum limit of eight bedrooms for HMO properties, although some may consider properties with more.
- Client types: HMO mortgages can be secured in personal names or through limited companies and are available for those managing multiple properties.
- Loan sizes: Lenders assess rental income on a multi-let basis, which can allow for larger loan amounts compared to single-let properties.
- Loan to Value (LTV): LTV is typically capped at 75%, though some lenders may offer higher limits. The size of the loan can also depend on the maximum LTV allowed.
- Property value: The minimum value for an HMO property is usually in the region of £100,000, but may be higher in London. Some lenders may not have a minimum property value requirement.
