HMO Mortgages & Law around them
While the new laws should not affect landlords’ profits, failure to comply with these laws will result in large fines. The same is also true of mortgage laws relating to houses of multiple occupancy (HMOs). There are new laws governing how investors must manage these properties. Typical HMOs and large student residences or single working or dss tenants, but they can be any similar building where toilet and cooking facilities are shared. There are now investment mortgage guidelines relating to the standard of facilities within the building. The introduction of these investment mortgage laws into the Housing Act has seen many landlords get rid of their HMOs in favour of other types of property, though there have also been many who have seen this as an opportunity to invest.
Most HMO properties will require a HMO license which can be obtained from the local council. Each room size would need to meet building regulations along with other building regulation requirements including linked smoke alarms, emergency lighting, self closing fire doors with spoke strips etc. Along with the usual gas safety cert and electrical cert a yearly maintenance will be required on the fire alarm system.
Discount Mortgages has extensive experience with HMO mortgages and can also provide comprehensive building and contents insurance. As these properties can be high maintenance it is advised to take out good landlords home emergency cover for your boiler and plumbing systems. At this time HMO property purchases are very popular as they can offer high returns. You are typically responsible for all utility bills inc gas,electric, water and council tax. If you are in breach of your HMO licensing agreement you can get fined up to £5000 for each breach so ensure you do regular inspections on your property. Don’t let this put you off as you should be ensuring the property is safe at all times for all residence. Fire hazards are one of the main concerns of the local authorities.
If you purchase a property to convert into a HMO then lending is based on the current property so a traditional mortgage or bridging finance would be required till the works are completed and once a HMO certificate is obtained then re-mortgaged with a HMO lender. You must be careful as you will need to look into early redemption penalties from the original lender and ensure you have the relevant insurance in place. When doing your conversion ensure all building regulations guidelines are met and consider card meters for each room as electrical bills can be high due to tenants leaving lights and electric heaters on all day and night. Each card meter costs less than £60 and cards are available at under 10 pence each.
While there are not many lenders offering HMO mortgages at the moment new entrants are expected to enter the market in 2014 with higher LTV’s and competitive rates. When looking for the right HMO mortgage call Discount Mortgages as you will be well looked after. Current maximum LTV is 85%. During 2014 it is expected that new lenders into the market will offer more 85% LTV HMO deals. If you’re looking for a broker who has access to all the lenders with HMO products then look no further. We just don’t offer HMO mortgages we have hands on practical experience in HMO properties.
Contact us now for any urgent enquiries.