Houses in Multiple Occupation (HMO) mortgages are a variation on the buy-to-let concept. However, they are different in one significant detail - buy-to-let mortgages do not allow for the letting of a property under multiple tenancies. The terms and conditions of standard buy-to-let mortgages will stipulate that the owner landlord cannot multi-let.
With an HMO mortgage you can let to multiple tenants under the terms of your agreement with the lender. The interest rates for HMOs can be slightly higher than traditional buy-to-let deals and you may also pay more in fees since lenders will subject HMOs to a more detailed valuation process. The valuation is calculated by assessing the market price of the building itself, or an estimate based on a multiple of the rent. The chosen valuation method is subjective and can be based on the lender’s criteria, the surveyor’s preference, or the type of property.
In more recent years HMOs have become a popular choice with both tenants and landlords as the rent is often more affordable. Therefore, as a landlord you could benefit from higher gross yields than those generated by standard buy-to-let properties.
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