hmo

Posted by Giulia Saletto, September 29, 2021

Get an online
HMO mortgage

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with a Decision in Principle in 2 minutes.
* Getting a DIP with Molo is free and will not affect your credit score

The simplest way to get a buy-to-let mortgage

Ditch the long waits and the endless paperwork.

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“Simply the best and most efficient service I have ever received from a lender, having been borrowing for the past 10 years.”
– Tal B, January 2021  

How it works

Here’s what you need to do to get your mortgage in minutes

Check your eligibility

Check your eligibility

Answer a few questions about you and what you think you'd like to borrow

Mortgage in Principle

Mortgage in Principle

We'll let you know whether we can lend to you and how much you can borrow

Property check

Property check

Tell us a bit about the property you'd like to buy

Choose your mortgage

Choose your mortgage

Select the mortgage that's right for you

ID verification

ID verification

Upload your ID and take a selfie so we can check you're you

Mortgage offer

Mortgage offer

If you and your chosen property meet our lending criteria, we'll agree your mortgage offer

Check your eligibility

Answer a few questions about you and what you think you'd like to borrow

Mortgage in Principle

We'll let you know whether we can lend to you and how much you can borrow

Property check

Tell us a bit about the property you'd like to buy

Choose your mortgage

Select the mortgage that's right for you

ID verification

Upload your ID and take a selfie so we can check you're you

Mortgage offer

If you and your chosen property meet our lending criteria, we'll agree your mortgage offer

Buy-to-let eligibility criteria

Check if you match our current criteria  and get started with a HMO mortgage with Molo:

Houses in Multiple Occupation (HMO)

We currently lend to HMOs with up to 6 tenants.

Buy-to-let mortgage or remortgage only

We don't yet offer residential mortgages or consumer buy-to-let.

No portfolio landlords

You must have less than 4 other mortgaged buy-to-let properties.

Property must be in England or Wales

We don’t yet provide mortgages for properties in Scotland or NI.

60% to 75% Loan to Value (LTV)

For HMO properties we can only lend up to 75% LTV.

In addition to ‘Individuals’ criteria:

Special Purpose Vehicles (SPV) limited companies only

Must be a Real Estate SPV registered within England or Wales.

The SIC code must be one of the following:

64305, 64910, 68100, 68209, 68310, 68320. No other SIC codes will be accepted.

Maximum of 4 directors or shareholders

Each director or shareholder must provide a full personal guarantee.

A HMO (house of multiple occupation) is a property that is rented out by 3 or more people who do not form a household (i.e. are not a family). Bathroom and kitchen facilities are shared between residents.

 

A large HMO is one where 5 or more people rent out the property. Large HMOs need to meet certain standards and obligations and require a license from the local council. For further information or to apply for this licence, visit the gov.uk website.

Molo is not a broker, we are a lender. With Molo, you can actually get a mortgage directly without having to interact with an intermediary who may charge you a separate fee.

We use industry leading technology to process our mortgages fully digitally. This leads to the most efficient and quickest way for you to get a mortgage offer on your buy-to-let property. 

 

A ‘Decision in Principle’ sometimes known as an ‘Agreement in Principle’ or a ‘Mortgage in Principle’, is a document that lenders provide which acts as confirmation that they are prepared to consider lending to an individual based on information the individual provided. 


A ‘Decision in Principle’ is useful to have as proof to an estate agent or seller that you can afford to buy the property. 

You only pay the interest on your mortgage each month, without repaying any of the capital loan itself. The idea is that you build up enough money to be able to pay off the mortgage at the end of the term in other ways – for example through investing in stocks and shares, pension endowment or the sale of this/another property.

Get your online Decision in Principle

90% of our Decisions in Principle are given in less than 2 minutes. It’s free and will not affect your credit score.

What is a HMO? (House of Multiple Occupation)

Posted by Simon Banks, May 20, 2021

What is a HMO? (House of Multiple Occupation)

The private rental sector continues to grow from strength to strength, and there are now 4.5 million households renting in England. Of those rented homes, around 500,000 are classified as houses of multiple occupation (HMO).

It seems like the appetite is growing for this sector in the rental market. But is a HMO the right move for landlords looking to invest in the market, or should you stick with single-let properties? In this guide, we’re unpacking the world of HMO to bring you everything you need to know about an alternative type of rental home.

What is a HMO?

A house of multiple occupation is a rented home shared by numerous people who consist of either a single person, families or cohabiting couples. That’s essentially a HMO. However, it’s a bit more nuanced than that, as there are several types of HMO properties.

Different types of HMO properties

  • A property shared by three or more people from at least two households with shared areas like the kitchen, bathroom and toilet
  • A home lived in by the landlord as the owner-occupier with more than two other tenants
  • Private-owned property shared by students who are treated as a separate household.

Essentially, a HMO needs to be shared by more than two people who are not related and share the toilet, bathroom and kitchen facilities. Each person renting will probably have a separate tenancy agreement, too.

Great! So is that HMO in a nutshell?

Sort of, but also, no. It gets slightly more complicated when you add five or more people to the property, as the house of multiple occupation would then be considered a “Large HMO” and therefore need a licence (more on that later).

What else should I know about HMO?

Along with your usual responsibilities on a single-property home, HMO landlords need to adhere to several requirements before letting a house of multiple occupation. It’s essential to understand these obligations, as failure to do so can result in a large fine of up to £5,000.

Legals for HMO landlords

  • Display a notice in the property stating the name, address and contact number of the landlord or official property manager
  • Conduct professional health and safety inspections and ensure the property is well maintained. You should also keep a record of any safety checks and repairs carried out
  • Ensure the property isn’t overcrowded
  • Provide working smoke alarms and heat detectors in kitchens and keep fire escapes clear
  • Carry out a fire risk assessment in accordance with The Regulatory Reform (Fire Safety) Order 2005
  • Cover the property with the correct landlord insurance for HMO properties
  • Maintain a clean water supply and proper drainage
  • Provide an up-to-date legionella risk assessment
  • Supply any gas/electrical safety records requested by the local council
  • Maintain a safe environment in all communal areas

What about that HMO licence? 

If your property houses fewer than five people, it’s unlikely that you’ll need a licence. By law, you won’t be required to get one. However, some local councils may ask you to obtain a licence before letting your HMO. That’s why it’s important to check with your local authority before renting out any HMO property. A HMO licence is mandatory for properties with five or more tenants all living under one roof.

Is HMO a good investment opportunity?

Whether or not a HMO is a good investment opportunity comes down to your own circumstances, plus other factors that you may or may not deem beneficial. While we can’t tell you if a houses of multiple occupation is right for you, this type of rental property is regarded as having some benefits.

HMOs have been known to achieve higher yields than single-rental property, and for many landlords, the yield plays a significant role in their decision. In some cases, rental yields for houses of multiple occupations have been known to generate up to three times higher than traditional lets.

You could also benefit from fewer void periods with a HMO. If one tenant moves out of the property, you’ll still have other tenanted rooms. In a single-property rental, once the tenant moves out, it becomes empty. Consequently, landlords with a HMO could continue seeing cash flow, even if one of the rooms sits empty.

Arrears is an issue landlords can encounter, and it’s the same with HMOs. However, having multiple tenants means it’s more likely that you’ll receive rent from the majority of people living in your house even if one person falls into arrears. Whereas a single-tenant property wouldn’t generate any rental income if the tenant falls behind.

What are the risks with HMO? 

It’s all well and good banging the drum about HMO benefits, but what about potential drawbacks? HMOs usually mean increased work for landlords, as you have more tenants to manage. The turnover may also be higher, with tenants regularly moving in and moving out.

Tenants will need a separate contract too, which requires more work than a single-let property that usually only has one tenancy agreement. A HMO may also require more repairs. There is a greater number of people using the property every day, which could mean things breaking with increased use.

If you’re not keen on the extra work, you can always hire a property manager to look after the day-to-day running for you. However, there is an added cost with hiring professional property management, and they will usually take a percentage out of the monthly rent for their services.

Can I get a Houses of Multiple Occupation (HMO) mortgage? 

While we all wish we had a Scrooge McDuck money pit to dive into and take a few shiny coins to purchase a property outright, most bricks and mortar investments are accompanied by a buy-to-let mortgage – and it’s no different for HMO.

Historically, getting a mortgage for a HMO property is harder than a single-let house. There is more responsibility with HMOs, and many lenders consider them a higher risk. That means the lender might not be willing to lend or they will only do so on high HMO mortgage rates.

What are HMO lending requirements?

HMO mortgage criteria differs from lenders, but as a rule of thumb, you can expect some additional requirements. These may include:

  • Minimum property value, which could be between £75,000 and £100,000
  • Minimum level of experience, usually between 12 and 24 months
  • Maximum number of storeys (usually no more than four)
  • Maximum number of bedrooms, usually between six and eight
  • No more than one kitchen in the property
  • A communal seating area
  • The maximum percentage of the property’s value you can borrow (known as the loan-to-value or LTV) is usually 75 per cent.

On top of these added requirements, you will also need to meet the lender’s standard buy-to-let lending criteria that covers age, income and credit reports.

Can I use a HMO mortgage calculator? 

If you’re unsure how much you can borrow for your houses of multiple occupation investment, using a mortgage calculator should help you get a clearer picture. A HMO mortgage calculator can also give you an idea of how much the monthly repayments might be.

Houses of Multiple Occupation and Molo

While we’re not ones to toot our own horn here at Molo, we take pride in offering HMO mortgages to landlords with 12 or more months’ experience. You can also borrow on HMO homes with up to six bedrooms and get a loan to value of up to 75 per cent of the property’s price.

Our five-year fixed deals offer a rate of 3.74 per cent, meaning landlords will benefit from a competitive rate when borrowing with us. So if you’re thinking about investing in HMO, the least you could do is have a look at our products and see if there’s a good fit.

Who knows? You might find the perfect mortgage for your houses of multiple occupation investment.

Learn more about Molo’s HMO mortgage offers

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