Categories: Case study | hmo

HMO mortgages sit within a complex area of buy to let mortgage borrowing. When it comes to getting funding in place, it can be easy to overlook seemingly trivial details that can fall outside lender criteria, but we are here to help.

The client in this case was looking to grow their property portfolio and wanted to raise capital for a deposit from a five-bedroomed HMO property they owned.

The client was exiting a bridging loan, so getting a more affordable mortgage interest rate in place would also be beneficial to them.

The case

  • Investment route: Limited company HMO
  • Loan needed: £297,500
  • Property value: £425,000

How we helped the client

The property location was a challenge. Firstly, whilst the HMO was in a major city centre, the area did not have many other HMOs, indicating an overall lack of demand for this type of property. Secondly, the HMO was opposite a busy fast food restaurant on a high street.

A fast food restaurant sitting opposite to the HMO may seem inconsequential, but there are several reasons why some lenders don’t accept properties close to takeaway outlets. This is related to how difficult the property could be to resell, and how attractive the property will be to possible tenants.

Takeaways draw in more traffic and footfall from customers and delivery drivers. This potentially means more noise and disruption for tenants, as well as an increased fire risk. And, while the restaurant’s food may smell amazing, tenants may not be happy to endure constant wafts of cooking throughout their tenancy.

These concerns may not cross most people’s minds, especially since the restaurant in this case was only a small local business, but lenders are obligated to assess every possible risk.

As mentioned, the lack of other HMOs in the local area was also a concern for some lenders. If the property cannot attract the kinds of people willing to share a house, such as students or young professionals, then the landlord may struggle to pay their mortgage.

However, there are lenders that will accept mortgage applications for properties like this. Our mortgage advisors are skilled at pinpointing them for tricky cases like this.

After conducting thorough due diligence with lenders within a shortlist, the advisor managed to find a lender who could accept the property, and from the choices available was the most cost effective solution for the client.

By getting this deal across the line we managed to raise funds for the client to fulfil their investment plans and get a complex case across the line.

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