Buy-to-let mortgages for student / HMO properties

by Ed Firmin

Posted on Wednesday, November 4th, 2015 at 10:00

Landlords that want to let to students or rent out a House of Multiple Occupation (HMO) have a few extra considerations to take into account when applying for a buy-to-let mortgage.

Generally, buy-to-let mortgages are interest only, need bigger deposits and for the rent to more than cover the mortgage payments, typically at least 125% of the monthly interest payment on the loan. Lenders usually want evidence of prospective rental income verified by independent sources.

The bigger deposit you’ve got, the better a deal you can get.

If you’re looking for a reverse mortgage on a student property, it may just limit your options on the number of lenders that will allow students in your property, but just be open and honest about who is going to live in there. You also have to consider whether one of those students is a family member, some parents do invest in a student property as an alternative to paying for their son or daughter’s accommodation, but that, again, will limit the number of lenders open to you.

If you are self-employed, this again, may mean that less lenders are willing to offer you a mortgage.

If you want to buy an HMO, then you really do need to seek out specialist lenders, most of the high street banks won’t consider lending on these properties. As with student properties, there are specific lending criteria different to a general buy-to-let mortgage. A bigger deposit again is going to open up the number of deals available to you. If you need a licence for your HMO, then lenders do look at this favourably, because it means that your property will need to be meet certain standards.

For HMOs that don’t need a licence, then lenders will still consider an application, but they might need to see evidence that the property would be in a condition to get a licence if it was needed. You might also have to get confirmation from your local council about future licensing conditions.

In a nutshell, you can see how confusing it is, each lender will approach your situation differently. So my advice? Seek out a mortgage broker. It will pay off big time, as they will also have access to deals that you won’t. They will be able to assess your situation and your chance of getting the best deal that works for you. For something that’s so important to you, and requires specialist knowledge, why wouldn’t you seek out the expert?  We were impressed with the service offered by Andy at Mortgage Eye, just let him know where you heard about him.

Likewise, if you’d like some advice on buying a property to let, what the market is like in Canterbury for students, please get in touch, I can answer all your queries.


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