As a first-time buy-to-let landlord, you might be wondering about the possibilities of securing an HMO, or house in multiple occupation. Lenders are typically wary of this type of property as there are multiple residents, meaning it can be more difficult to repossess the property if the borrower does not keep up with the payments. When paired with the inexperience of a first-time-buyer, this can be too much risk for many lenders to even consider.
Raising finance for an HMO property is often more difficult than with a regular buy-to-let mortgage. Lenders will want to see at least 6 months of experience managing a similar property, such as self-contained buy-to-lets. However, buy to let landlords know that HMOs offer the best rental yield. The risk is also spread over multiple tenancies. This reduces the chance that a property will be left vacant. So it makes sense for first-time landlords to explore this option.
While some lenders are starting to open up to the prospect of lending to first-time buyers with a buy-to-let mortgage for an HMO, it is not without its downsides. Naturally, lenders will look to manage their risk on any lending arrangement. In this case, they will attach a high premium to this type of lending, typically in the form of higher fees. This type of mortgage is therefore only suitable for the financially astute landlord who will know how to make up for the added costs.
Remember that the interest and fees on your buy-to-let mortgage can be offset against your tax liability, so this is another potential area of savings. This makes the prospect of purchasing an HMO even more attractive for investors.
To learn more about the opportunities available within the buy to let market, get in touch with the friendly team at Niche Mortgage Info today.