Buy to let mortgages and HMO licensing

mr_auspicious

My partner owns a three bedroom buy to let property. She has a large buy to let mortgage on it (£400k) which is serviced easily by the rent. She has a large amount of equity in the flat, well over 50%.

The local authority have now decided that it will need an Additional HMO Licence as there are three unrelated people staying in it.

The sharers are on a single assured shorthand tenancy agreement but the local authority tells me that makes no difference.

The mortgage on the property is on a fixed rate until May 2020 but I'm reading that mortgages for HMOs are more difficult to get, that we won't be able to borrow as much with one, even not enough for a full remortgage, and that rates are worse

Would lenders see it as an HMO because of the licensing or, as it will be sharers in one flat, with a single AST they wouldn't see it as one?

We were actually planning on borrowing more after the fixed term was up to pay for home improvements for a house we're moving in to, but with the changes in stress testing, mortgage relief and now this we're thinking that selling might be the best option.

anselld

Lenders will see it as an HMO because ... it is an HMO. It was already an HMO before the Local Authority imposed Licensing. The fact that it is now a Licensable HMO will make little or no difference to most lenders.

mr_auspicious

Why is it that there are different buy to let mortgages for HMOs?

We've had a buy to let mortgage on the flat for ten years and we've never been asked about it being an HMO, or whether it would qualify as one? As far as I can remember the only requirement was that there was a single AST.

My concern is that now its an officially licensed HMO and what that might mean to lenders

pramsay13

Where are you reading there are different buy to let mortgages for HMO properties?
Once it's time to remortgage you could speak to a broker.
You could sell now although the lack of HMO licence will be reflected in the price.

anselld

mr_auspicious wrote: »

Why is it that there are different buy to let mortgages for HMOs?

We've had a buy to let mortgage on the flat for ten years and we've never been asked about it being an HMO, or whether it would qualify as one? As far as I can remember the only requirement was that there was a single AST.

My concern is that now its an officially licensed HMO and what that might mean to lenders

I suspect you are thinking of HMO let as individual rooms. They don't like them presumably because they would have to deal with multiple agreements with multiple end-dates in the event of a repo.

All lenders will have specific conditions based on their own whims. You need to check when you remortgage but I really don't think Licensing status will be a significant restriction when the time comes.

mr_auspicious

anselld wrote: »

I suspect you are thinking of HMO let as individual rooms. They don't like them presumably because they would have to deal with multiple agreements with multiple end-dates in the event of a repo.

All lenders will have specific conditions based on their own whims. You need to check when you remortgage but I really don't think Licensing status will be a significant restriction when the time comes.

Thanks, that makes sense. I've had a quick look at HMO mortgages and it does look like they're specifically for properties with multiple occupants with different tenancy agreements.

mr_auspicious

pramsay13 wrote: »

Where are you reading there are different buy to let mortgages for HMO properties?
Once it's time to remortgage you could speak to a broker.
You could sell now although the lack of HMO licence will be reflected in the price.

I actually first saw them when I was looking at how much we would be able to borrow when we remortgage, one of the options was for mortgages for HMO properties. Looks like I was worrying unnecessarily.

Thanks for your reply