HMO Mortgages often have higher rental stress tests than standard buy to let properties. On the other hand, you should obtain higher rent compared to a standard buy-to-let.
New regulations limit borrowing based on the rent deemed achievable by the lender's valuer. The minimum is assessed at a rate of 5.5% ensuring a 125% coverage.
For an example, As such for a £100,000 mortgage you would need at least £572 rent, at a minimum.
This demonstrates the minimum - mortgage lending criteria may be more robust.
Landlords who are higher rate taxpayers or have personal income below a threshold. Have higher stress tests.
Landlords who are higher rate taxpayers, often get five-year fix mortgages or invest via a limited company to obtain lower stress tests.
Property types also affect affordability with HMO Mortgages having higher stress tests compared to standard lets.
Our mortgage advisors will assess the market to help find the best mortgage given the anticipated rental amount. We can recommend structures to get the lower stress tests or help release equity to fund higher deposits.
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