Hybrid HMO / Multi-Unit Mortgages
The UK mortgage market for HMOs is tailored to cater to the needs of landlords and investors seeking higher rental yields. Lenders assess these properties differently, considering factors such as occupancy rates, rental income potential, and adherence to HMO licensing requirements. This necessitates comprehensive knowledge of both the property market and regulatory landscape.
Securing a HMO mortgage often involves higher interest rates and stricter lending criteria compared to standard buy-to-let mortgages. Prospective HMO landlords must demonstrate robust management capabilities and a thorough understanding of property maintenance and tenant management to gain approval. This ensures the sustainability and profitability of their investment.
We have seen more queries regarding Multi unit freehold properties either operating as multiple HMOs or with an element of HMO usage.
The below are some key points to determine how the case should be processed and key considerations:
PROPERTY CONFIGURATION
Are there barriers to standard occupation?
SEPARATION
Lockable rooms, shared areas, split utilities
LICENSING & PLANNING
Does the property require licensing or planning?
MUFP / HMO CASE STUDIES
EXAMPLE 1
A property is divided into three separate units, each with three bedrooms. Every unit functions as a House in Multiple Occupation (HMO) and includes its own services, with no shared facilities. Since all units are licensed as HMOs and there are no barriers to standard occupation, this property is considered a standard multi-unit freehold. Valuation should treat it as such, but be aware of any comments regarding planning and Article 4 that could affect the property's sale.
EXAMPLE 2
A property is divided into three units, each with three bedrooms, and all operate as HMOs. However, communal lounges and kitchens on each floor are accessible to all within the block, making the property shared. Thus, the property should be treated and valued as an HMO, considering that the units are not entirely independent.
EXAMPLE 3
In a block of five flats, one flat is sold on a leasehold basis. When reviewing the freehold of the remaining flats, control over the leased unit is not possible. Key considerations include the impact of the leasehold on the freehold units, particularly regarding shared locations and uses. This assessment includes whether the leasehold flat could affect the freehold flats, especially if they are rented out.
EXAMPLE 4
A leasehold property has been converted into multiple separate units under the existing leasehold title, such as an existing block converted into multiple occupancy units (MUs). This conversion requires confirmation of several factors, including:
* The number of units, with a preference if it's above or below 125.
* Whether the freeholder is aware and has agreed to the conversion.
* Necessary planning permissions for the conversion.
* Impacts on leases and Assured Shorthold Tenancies (ASTs), including considerations for ground rent and service charges by the freeholder.
All properties are subject to valuation, and the above serves as a guide to facilitate discussions.
All properties are subject to valuation and the above is a guide to help any conversations.
CURRENT MUFB/HMO LENDERS
Some lenders will not deal direct with customers, with this area being specialist we would suggest speaking with an experienced broker to guide you.
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This list is not exhaustive
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