How to finance your HMO property


Are you planning to become an HMO property owner? There’s no reason why you wouldn’t want to become the owner of a house in multiple occupation. HMOs are lucrative in comparison to single occupancy properties. A house of multiple occupancy allows you to maximise the amount of money you can obtain from local authorities, not to mention the exceptional returns. You’ll have at least 5 tenants and the demand for affordable housing continues to increase with every year. Landlords find value in having an HMO in their portfolios. But what about financing? If you want to know how you can finance for a house of multiple occupancy.

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Find a buy-to-let mortgage

If you want to get into buy-to-let, look into mortgages for HMO properties. There are many mortgages for houses in multiple occupation you can access in the UK market. You will be surprised to see how many financial options are available. HMO mortgage deals for landlords are different from buy-to-let deals. Since the HMO has multiple occupants, there is a higher risk to loan money. Unlike a buy-to-let mortgage, the interest rate is higher and so are the fees. However, this does not mean that the loans are exceptionally expensive. What you can expect are competitive rates for borrowers. There is one other thing, though. To get the loan, you have to have experience as a landlord. Money lenders do not feel comfortable giving money to borrowers with no experience in managing rental properties.

Consider bridging finance

If you are looking to finance the purchase of a house of multiple occupancy, think about applying for a bridge loan. Bridge loans are popular in the real estate world because they provide temporary financing until you manage to get your hands on some cash. Therefore, if you are buying an HMO before selling your existing real estate, a bridge loan will provide you the money you need for the down payment. Bridging finance is not without risks, but no loan is for that matter. If you have the opportunity of buying an HMO, use a bridge loan to finance it.    

Buy with your cash

The last option you have is using your own funds. It is said time and time again that carrying around debt is bad. Well, is it? It is only normal to want to purchase a property with your own cash because it is the smallest burden. But there is a lot to consider when wanting to buy a real estate with cash. Even if you have the possibility to pay in cash, it makes no sense investing all that money in a real estate purchase. With a mortgage, for instance, you have more flexibility.

The bottom line is that there are solutions if you are looking to finance your HMO property. Each one has benefits and drawbacks, so is there a winner? Sure there is. The best thing you can do is apply for an HMO mortgage. The rates are not very high and providers are happy to help you.