3.85% 5-year fixed rate 75% LTV deal for HMO/MUB
- Published: Wednesday 11 January, 2017
- Category: BTL mortgages
- By: Matthew Bone
- Updated: Thursday 13 April, 2017
One of our specialist lenders has released a new 3.85% 5-year fixed rate product designed specifically for Houses in Multiple Occupation (HMO)/ Multi-Unit Blocks (MUB) with a 75% loan to value (LTV).
What are the key benefits of this mortgage?
The deal includes an attractive fixed rate of 3.85%, so you will know exactly what your monthly repayments will be for the 5-year initial rate period, even if interest rates fluctuate.
Many fixed rate products have an application fee based on a percentage of the loan, meaning the more you borrow, the greater the cost of securing the mortgage. With this product, you pay a one-off application fee of just £1999, regardless of the amount you borrow (up to £500,000).
This product is available to both individual landlords and limited companies; it features a favourable rental coverage rate which starts from 130%.
Fixed rate HMO/MUB Mortgage
|Product type||Initial rate||Max LTV*||Product fee||ERC's**|
|5 year fixed||3.85%||75%||£1,999||For 5 years|
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
*LTV - Loan to value
**ERC = Early Repayment Charge
Rental yield from HMO/Multi-Unit Blocks versus standard buy-to-let
HMO and MUB’s typically have a higher rental yields than single rental properties, the example below illustrates how this can be possible.
If you are looking at buying high value property, or in a big city where property is particularly expensive, these deals may be of interest to you.
Take, for example, a three-bedroom house. The landlord could opt to rent the property to one family unit for, say £850.
However, if the landlord rented out each of the 3 bedrooms (and possibly one of the reception rooms as an additional bedroom), it is possible that the total rental income from three or four individuals could exceed the £850 from one family.
e.g. if a monthly rent of £350 per room per month was realistic for the property, this would mean a total of £1,050 from three individuals or £1,400 from four individuals (if a reception room was also converted into a bedroom).
Can I still get the required funding I need?
With the Prudential Regulation Authority deadline of January 1st having passed, all PRA regulated lenders must now adhere to the changes in underwriting criteria.
5 year fixed rate mortgages, like this one, fell outside of the PRA’s changes.
This could mean that this product will allow you to borrow a larger amount (without the need to raise your rents), than other products which are not fixed and have a deal period shorter than 5 years.
Suitable product for student or young professional accommodation
This lender will accept up to 20 rooms/units on one freehold mortgage application, making it well-suited to landlords looking to purchase or remortgage property types such as student housing, or accommodation targeted at young professionals in city centre locations.
What qualifies as an HMO/MUB property?
An HMO is a house or flat let to 3 or more unrelated people, that share facilities such as a bathroom or kitchen.
A Multi-Unit Block is classified as anything from a semi-detached house split into two self-contained flats or a new purpose built block of up to 20 self-contained flats on one freehold title.
For more information on HMO please read our guide to being an HMO landlord.
With this product, both licensed and unlicensed HMO applications are welcomed.
Do I need an HMO licence?
You must have a licence if you’re renting out a large HMO. Your property is defined as a large HMO if all of the following apply:
- It is rented to 5 or more people who form more than 1 household
- It is at least 3 storeys high
- Tenants share toilet, bathroom or kitchen facilities.
Even if your property is smaller and rented to fewer people, you may still need a licence depending on the area. Check with your council (see below).
The UK government's website offers a postcode based search in order to identify which council issues licences for your property, and where you can access further information regarding HMO's and their licensing:
- Apply for an HMO Licence in England or Wales
- Apply for an HMO Licence in Scotland
- Register an HMO in Northern Ireland
It is worth noting that, should you need a licence for your HMO, you need a separate licence for each HMO you run.
For full mortgage criteria and to discuss your eligibility, please get in touch.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.