Mortgages for HMO (houses with multiple occupants)
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How are houses with multiple occupants defined?
For the purposes of mortgages and rental agreements, a sole occupancy residence is characterized as having one household living in it. A household can be defined as either an individual inhabitant, or individuals from the same family who live together. Therefore, houses with multiple occupants are defined as houses in which unrelated occupants share facilities such as bathrooms and kitchens. Houses with multiple occupants may incorporate a group of individuals live in the property who are not related to each other. The most common situations in which this might occur include house shares and student properties.
Getting a mortgage for HMO
If you want to buy a house with a friend or a group of friends, there can be several advantages including sharing costs and benefitting form ownership rather than rental – but before you embark on a joint purchase it is important to understand what type of mortgage you need to get.
In the event that you want to take out a mortgage with the specific goal of buying a house with multiple unrelated occupants, you will generally need to get a mortgage with tenancy in common. Unlike a like a joint tenancy mortgage (which would be the more usual choice for, say, a couple buying a home together), mortgage holders with a tenancy in common are not treated as one single household. This makes them the more commonly used mortgage option for house with multiple occupancy (HOMs) where the people buying the house are not related to each other – for example, in the situation of a group of friends buying a house together.
Unlike a joint tenancy – which would be the more usual mortgage option for a couple purchasing a home together – mortgage holders with a tenancy in common are not legally counted as one single household. In practice, this means that you each own a share of the property, and if one of you dies, the outstanding mortgage will be the financial responsibility of the remaining named mortgage holders. However, a key difference from a joint tenancy mortgage is that the property itself will not automatically pass to the other named mortgage holders in the event of your death. Instead the property will be passed on base on the details of your will – so it’s vital for everyone named on the mortgage to have a will in place when getting the mortgage. Another key difference from a joint tenancy is that a tenancy in common means that you can each own a different share of the property, rather than an automatic half-and-half division of ownership.
If you are unsure about what mortgage product is suitable for you call us on 0117 313 7780 or request a callback.