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4 Bed student property - HMO mortgage or BTL?


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Hi guys,

 

Looking to potentially buy a 4 bed student property with students in situ, but can't seem to find a straight answer!

If all 4 tenants are on 1 tennancy agreement (which they are), would this be mortgaged via a standard BTL mortgage or require an HMO mortgage?

I know if there are 4 tennacy agreements then a HMO mortgage would be needed but unsure on the single Tennancy situation?

 

Could someone please shed some light on this?

 

Thanks

Max

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You would surely need an HMO mortgage

What happens when you get new students, not on the same AST?

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2 hours ago, Vineet Gupta said:

You would surely need an HMO mortgage

What happens when you get new students, not on the same AST?

Students (4 of) would be on a 11 month single tennancy agreement for the academic year, no?

 

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This is always a complex question because as far as any local authority is concerned this is a HMO. However, as you say, student usually sign a 11-12 month agreement and do so all on one agreement. If one student leaves the rest carry the can or find a replacement. This is very different to having 6 bedrooms occupied by strangers on licenses.

Therefore many lenders allow up to 4/5 students on one AST to be considered on their standard products and policy and dont class these as HMO mortgages. For example:

  • Coventry - Properties subject to an Additional HMO licence are acceptable subject to a maximum of four tenants on one relevant tenancy agreement.
  • TMW - The Mortgage Works consider the following types of property as a HMO:
    • A property occupied by five or more people
    • A property with five to seven lettable rooms in an area commensurate with multi letting
  • BM Solutions - The maximum number of occupants is 5. They must all be party to the agreement. It is the landlords responsibility to ensure that all legislation is complied with including (but not restricted to) legislation relating to Tenancy Deposit schemes and HMOs (Houses in Multiple Occupation). Properties subject to Local Authority Homes in Multiple Occupation (HMO) licensing may be acceptable, subject to the valuer’s assessment of suitability based on our requirements.

Where it gets more complex is where there are things like locks on doors or anything that alludes to this being operated like a standard HMO. Fire doors and blankets etc are fine, but locks, sinks in bathrooms, mail pigeon holes etc may cause the valuer to class this as a HMO and not as a student let, so be mindful. Each lender is a bit different on this so its worth checking with them exactly where they draw that line.

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker & BTL Specialist

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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6 hours ago, Stuart Phillips said:

This is always a complex question because as far as any local authority is concerned this is a HMO. However, as you say, student usually sign a 11-12 month agreement and do so all on one agreement. If one student leaves the rest carry the can or find a replacement. This is very different to having 6 bedrooms occupied by strangers on licenses.

Therefore many lenders allow up to 4/5 students on one AST to be considered on their standard products and policy and dont class these as HMO mortgages. For example:

  • Coventry - Properties subject to an Additional HMO licence are acceptable subject to a maximum of four tenants on one relevant tenancy agreement.
  • TMW - The Mortgage Works consider the following types of property as a HMO:
    • A property occupied by five or more people
    • A property with five to seven lettable rooms in an area commensurate with multi letting
  • BM Solutions - The maximum number of occupants is 5. They must all be party to the agreement. It is the landlords responsibility to ensure that all legislation is complied with including (but not restricted to) legislation relating to Tenancy Deposit schemes and HMOs (Houses in Multiple Occupation). Properties subject to Local Authority Homes in Multiple Occupation (HMO) licensing may be acceptable, subject to the valuer’s assessment of suitability based on our requirements.

Where it gets more complex is where there are things like locks on doors or anything that alludes to this being operated like a standard HMO. Fire doors and blankets etc are fine, but locks, sinks in bathrooms, mail pigeon holes etc may cause the valuer to class this as a HMO and not as a student let, so be mindful. Each lender is a bit different on this so its worth checking with them exactly where they draw that line.

Stuart, that response is extremely helpful, thank you.

Pretty much along the lines of what i thought the situation was.

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