Buy to Let Mortgage Student HMO
Special features of what we offer include:
- Whole of market service - We work with most UK lenders
- Great rates! - Access to leading market mortgage rates
- Exclusive deals - Access to exclusive loan deals not available on the high street
- Fast turnaround - Speak to us today if you need to move quickly. We can access bridging loans and short term finance
- Raising finance? - Looking to raise additional finance on top of your existing buy to let mortgage? - we have access to a range of finance solutions
What is a Buy to Let Mortgage Student HMO?
A popular way to utilise a property’s potential is to convert it into a HMO (housing of multiple occupations) and market it to student tenants. Many landlords may be attracted to having student tenants, as they are generally easy to find and they rarely stay for longer than a year or so, which means that landlords are not tied down to long term contracts.
An HMO is a property that is rented out to three or more people, who are not from the same household, but who share kitchen, toilet and bathroom facilities. HMO properties lend themselves perfectly to student buy to let properties, as landlords can charge rent per room and allows for higher returns than normal buy to lets.
An HMO with five or more tenants is classified as a “large HMO”. In order to have a large HMO, landlords will have to obtain a licence from their local council.
The types and availability of buy to let finance is likely to differ depending on whether or not your property needs a licence.
Buy to Let Mortgages for non-Licensed Student HMOs
It is possible to secure buy to let finance for an HMO, which does not require a licence, from a traditional lender.
However, deciding on the finance for a buy to let mortgage for a student HMO may depend on the project itself. It may not be the best course of action to simply walk into a bank and select the first buy to let mortgage you find. Taking time to review the different buy to let mortgages available could result in huge savings.
It may be beneficial to contact a mortgage broker, who can find the best rates and buy to let mortgage solutions for any set of circumstances.
Buy to Let Mortgages for Licensed Student HMOs
Finding a buy to let mortgage for a licensed student HMO may be tougher than a non-licensed student HMO. This is because not all lenders choose to lend money within this area.
Typically, lenders are more attracted to those who have experience and a portfolio of successful buy to let properties before providing the finance required.
Conversely, it is still possible to access buy to let mortgages for licensed student HMOs from specialist lenders, which is why it is advisable to seek advice from a specialist mortgage broker.
Tax Changes in 2017
If you want to rent out a HMO to students, it is important for you to familiarise yourself with the latest tax rules that govern buy to let properties.
From 2017, landlords will no longer be able to deduct all the expenditure derived from their buy to let properties when calculating their profits for the financial year.
These tax rules do not affect limited companies and as such you may be tempted to set up your own ltd comapny for your buy to let property to circumvent the tax rules. If you are considering setting up your own limited company, it is important to review the associated costs before doing so.
Regulation Changes in 2017
In addition to the new tax rules, if you want a buy to let mortgage for a student HMO, you should bear in mind the changes to how the buy to let mortgage market is regulated.
Under the new regulations, before a traditional lender can approve a mortgage, the landlord's entire portfolio will be reviewed. Landlords will have to satisfy lenders that all of their buy to let properties are profitable, which means that landlords can no longer spread equity across their whole portfolio. As a result, lenders will not grant a buy to let mortgage if the landlord’s properties are not profitable.
The new regulations impose that lenders must implement a stricter income stress test. In order to secure buy to let finance, landlords must show that they can afford the mortgage repayments in the event that interest rates increase to 5.5%.
Finally, lenders will also require landlords with student HMO properties to have a rental coverage ratio of at least 170%, as opposed to the standard 145% for regular properties.
We work with the majority of UK lenders, and have access to exclusive buy to let mortgage deals for HMOs that are not available on the high street, which means we can make the process of finding a student HMO buy to let mortgage that bit easier.
To find more information about buy to let mortgages for student HMOs, why not call us today on 0117 403 4222, or fill in our online contact form to request a call-back for a free initial consultation with one of our advisors.