Jump to content

Remortgaging from a residential mortgage to a HMO mortgage


Recommended Posts

Hello!

Does anyone have any experience remortgaging a residential property onto a HMO mortgage? I'm curious is this is an easy thing to do?

Also will remortgaging onto a HMO mortgage affect how much equity I could pull out? Compared to if I just remortgaged normally onto another residential mortgage?

Thanks, Natalie

Link to post

Hi Natalie,

Just to check, do you have (or have you ever had) another HMO property? Or any other single household rental property?

I'm asking it, because becoming an HMO landlord is a bit more complex than just becoming a landlord for a simple property that you're going to rent out to a couple. There are quite a few extra requirements, regulations, licencing that you'll have to go through and based on your post, I get the feeling that you're not an experienced landlord. I apologise, if my impression is wrong.

Taking a new resi mortgage is a completely different ballgame from changing the mortgage type to BTL and starting a HMO. Yes, it's more complex, the mortgage assessment will be different, the rates will be different and your lender options will be limited dependent on your personal situation, the property itself and the figures around the deal.

Please speak to a broker and they'll sort things out for you.

Link to post
17 hours ago, lilla d said:

Hi Natalie,

Just to check, do you have (or have you ever had) another HMO property? Or any other single household rental property?

I'm asking it, because becoming an HMO landlord is a bit more complex than just becoming a landlord for a simple property that you're going to rent out to a couple. There are quite a few extra requirements, regulations, licencing that you'll have to go through and based on your post, I get the feeling that you're not an experienced landlord. I apologise, if my impression is wrong.

Taking a new resi mortgage is a completely different ballgame from changing the mortgage type to BTL and starting a HMO. Yes, it's more complex, the mortgage assessment will be different, the rates will be different and your lender options will be limited dependent on your personal situation, the property itself and the figures around the deal.

Please speak to a broker and they'll sort things out for you.

Hi!

Thank you for your response - I currently have 1 BTL property, so I don't have any experience with HMO's yet

Thanks!

Link to post

Hi Natalie,

That's fair enough. We all have to start somewhere and having a single BTL is good, as lenders do prefer it when someone has BTL experience before dealing with HMO. Whilst a broker can help you with the mortgage side of things, I would recommend that you speak to your local council regarding their requirements before applying for the mortgage. This will help you plan your next steps, give an idea of the timeline and understand your costs.

Link to post

You would need to establish whether you are in an article 4 area first, and if so you would need planning permission from the local authority to operate the property as a HMO. The lender will require this as part of the application.

You would then need to determine whether the HMO will require a license, this varies by local authority, and if so then you would need that license in place before you can remortgage as a HMO. That means you would need to install all the required safety features and minimum requirements.

A residential lender would not permit you to operate a HMO on a residential basis, even with consent to let i suspect. You would be in breach of the conditions and your buildings insurance would not be valid. If the house burned down you wouldnt get a penny. They would aslo not agree to the kind of structural changes you might be planning to make the house work as a HMO. If you are knocking walls down they would not be comfortable with this.

So, you need to think about the order of things. You would need the planning, a license possibly, then you would need a bridge or cash to clear the residential mortgage and do the development work before you refinance onto a HMO. Even then, the HMO is most likely to be limited to what the house was worth as a standard residential. So this is perhaps a very long way of saying, no, remortgaging onto a HMO is unlikely to affect the amount of equity you can pull out (unless its a 6-8+ bed).

 

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

Link to post

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...