HMO and Commercial Mortgages
What are hmo mortgages
The simplest definition of an HMO (Houses of Multiple Occupancy) is that the property will be occupied by multiple individuals who are not a single household (i.e not a family or some other special relationship). The property must be all of the occupiers only or main residence, is only used as a residence and at least one of the occupiers must be paying rent.
Licensed and Unlicensed HMO's
The significance of an HMO is that it may need to be licensed by the local authority but this is not the case for all HMO properties. Manageable Mortgages are able to secure mortgages for both licensed and unlicensed HMO properties and are able to provide you with advice on whether you should be looking to license the property.
HMO Purposes
HMO mortgages are available for a wide variety of multiple occupancy property types. Here we have listed some of the more recent HMO’s we have secured competitive rates for;
- First-time landlords
- Converted blocks of flats
- Bedsits and shared houses
- Privately operated halls of residence
- Student Accommodation
- Shared self-contained flats
- Cluster Flats
- Lodgings
- Hostels
- Individual shared self-contained flats
- Accommodation for workers/employees
Commercial Mortgages
When are commercial mortgages used?
Commercial mortgages generally take over where business loans finish. Business loans up to £25,000 are unsecured, but for larger amounts, lenders need security in order to reduce the risk to themselves.
A business mortgage usually lasts from three to 25 years and you can usually find a 70-75% mortgage. This is a measure of loan-to-value ratio to see how much you’re borrowing in relation to how much the property is worth. If it’s an investment then the amount you can borrow will be determined by the rental income generated by the investment, but this will not exceed 65% of the purchase price. If you are buying a business that includes goodwill, stock, etc then the amount available will be further reduced.
Key features
A business mortgage plan differs from a regular mortgage in the following ways:
- There are usually no fixed rates for commercial mortgages
- You’ll usually pay a higher interest rate on commercial mortgages compared to regular home mortgages as these are considered higher-risk to lenders
- Commercial mortgages tend to offer better interest rates than regular business loans as these require property as collateral
Eligibility and criteria
In order for you to qualify for a commercial mortgage, you’ll need to pass the lender’s eligibility checks which usually includes:
- The cash flow and any debts you may owe to assess the financial health of your company
- Your businesses’ projected income to determine whether you can cover the cost of the loan
- Your ability to pay the deposit which can range from 20% to 40% of the loan
- Rental income may also be taken into account as this will have an effect on your business’ cash flow
- General income, credit, and assets
Benefits
- The interest on your commercial mortgage is tax-deductible
- If your property increases in value, your capital could also see an increase
- You’ll be able to rent out the property to generate extra income
How to apply
Hiring a specialist broker like us, could help ensure you’re paired with the most suitable lender and make the application process more manageable.
A commercial mortgage application works similarly to taking out a regular mortgage for your home:
