Finance for HMOs and multi-unit blocks
Article Posted - 4th December 2019
Following the myriad of changes that have impacted the buy-to-let sector in recent years, landlords are looking at different property types to maximise their investment returns.
Changes to buy-to-let taxation have affected potential profits for landlords and lenders are using stricter rental calculations to determine affordability. Some landlords have turned to houses in multiple occupation (HMOs) or multi-unit blocks (MUBs) for greater rental yield and portfolio growth.
Top tips for arranging an HMO mortgage
Houses in Multiple Occupation have always been a popular choice with professional landlords looking to increase their rental yields due to the potential provided by having multiple paying tenants. At NLA Mortgages we deal with HMO enquiries on a daily basis and have over 25 different lenders on our panel who consider this property type.
1. Assured Shorthold Tenancies (ASTs) – some lenders accept multiple ASTs and others will only accept one.
2. Facilities - most lenders will only expect to see one kitchen and one living room in an HMO. If your property has more, you may need to source a mortgage with a specialist lender.
3. Tenant Type – if your HMO property has a specific tenant type, check lending criteria for DSS tenants, students and vulnerable tenants.
4. No. of rooms and size - HMO lenders have requirements for how many bedrooms they will accept in the property. NLA Mortgages works with lenders ranging from a maximum of 4 bedrooms to those with no limit at all. Checking minimum room sizes is also important as new HMO regulations stipulate a minimum of 6.51 square metres for an adult bedroom.
5. HMO licensing - check your HMO property is correctly licensed. Properties with 5 or more bedrooms occupied by more than 1 household sharing facilities, have to be a licensed with the local authority. Lenders will need the appropriate licences in place before mortgage funds are released.
Top tips for arranging finance for multi-unit blocks
Multi-unit blocks have been among the most enquired about property types every week at NLA Mortgages in 2019. Normally the domain of experienced landlords, multi-unit block properties can be valuable assets in their portfolio, significantly enhancing profits and helping them develop into full time investors.
1. Individual units - most lenders will require each unit in the block to be individually saleable.
- Separate utilities - each unit must have its own gas, electric and water supply.
- Separate entrances - each unit must have its own secure entrance be that inside or outside.
- Separate facilities -each unit might be required to have its own living space, kitchen and bathroom.
2. Unit size - check the individual units' square footage. Lenders will have a minimum each needs to meet. Exceptions for smaller units can be made where the majority of units meet criteria. NLA Mortgages has placed an MUB with one unit at 19 square metres before.
3. Experience - you will typically need letting experience when purchasing your first multi-unit block. The average minimum requirement is 2 years' landlord experience.
How NLA Mortgages can help
NLA Mortgages provides a free online buy-to-let mortgage search facility for all private landlords enabling you to source from a highly competitive range of buy-to-let mortgage schemes that are researched and updated daily.
Visit www.nlamortgages.co.uk to view our wide range of products.
You will often have access to schemes that are not available in the general marketplace and all can be viewed directly from the NLA website.
- Best in market products researched daily
- Cashback for NLA Full Members
- Find schemes that fit your expected rental income
- Free helpdesk for information and support
If you would like to discuss buy-to-let finance options, please contact the NLA Mortgages support team on 029 2069 5555.
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