Mortgages can ultimately let you scale a profitable and sustainable HMO business. I would even say they are essential to any HMO investor who wants to build a portfolio quickly. 

Because of this, it’s important to keep up to speed with the mortgage market. It may be a very dry topic, but accessing high street finance is a key part of growing your portfolio. 

So what is currently happening in the mortgage world? Here we’ll cover exactly that, in addition to the differences with HMO mortgages and the importance of using a mortgage broker.

What’s Happening in the Mortgage Market?

At the start of the first national lockdown last year due to the COVID-19 pandemic, the number of mortgage deals decreased dramatically across the market. The sector slowed down as lenders pulled products and struggled to carry out physical mortgage valuations.

In the wake of the pandemic, the Bank of England responded by cutting the base interest rate to 0.1% in March 2020. It has been held at this record low ever since, making borrowing cheap across the board.

While there has been much uncertainty in the past 18 months, the mortgage sector has rebounded with the number of deals now reaching pre-COVID levels. The number of products in the buy-to-let and HMO markets are continuing to increase. And lenders have gained further confidence as demand from landlords and investors has been on the rise.

Mortgage interest rates are currently on the rise in general, but the cost of borrowing is still historically low. And this means there are competitive deals out there. Moving forward, none of us can predict what will happen with interest rates, but keep in mind that they do fluctuate and can even change very quickly.

The Differences with HMO Mortgages

A HMO mortgage works in the same way as any other type of mortgage, but there are some key differences between HMO and traditional buy-to-let deals. Keep in mind that not all buy-to-let mortgage lenders offer deals on HMOs. While there is less competition in the HMO mortgage market, there are still a number of deals available.

HMO mortgage rates and fees tend to be higher than standard buy-to-let products. This is due to there being less competition in the HMO mortgage market. Additionally, the perceived risk is higher for the lender. Because of these reasons, lenders that are prepared to offer loans on HMOs will charge slightly higher rates and fees.

There are more hoops to jump through as well, but every lender has varying criteria. Landlords sometimes have to prove their experience before taking out a HMO mortgage. Other lenders also have specific requirements for the property. 

Importance of Using a Mortgage Broker

To grow a successful and sustainable HMO portfolio or business, you will need a good HMO mortgage specialist in your power team. It’s worth hiring an independent whole of market mortgage broker, so you have access to all of the products on offer.

Mortgage brokers can advise you on the best mortgage deals for your personal and financial circumstances and help you understand lenders’ varying criteria. On top of that, the majority of lenders that offer preferential rates often do so through mortgage brokers.

Additionally, HMO mortgage specialists can ensure you approach the right lender at the right time. This will save you time and money, ensuring you aren’t putting applications in for lenders who are unlikely to lend to you.

Brokers can even strengthen your mortgage application, helping you maximise your rental income statements (legitimately of course). And lastly, they can help you navigate an entire property purchase, so you can benefit from their knowledge and experience throughout the buying process.

One of the greatest things about property investment is that we can leverage our investments. And mortgages can help you do just that. It’s an incredible concept that we can take advantage of to grow our portfolios. 

Mortgages are a key part of the second of five stages of The HMO Roadmap, which is all about funding. For more training and advice on how to start, scale and systemise your HMO business, join The HMO Roadmap today. If you would like to speak to our mortgage broker at The HMO Roadmap, send an email to info@staging.thehmoroadmap.co.uk. 

About the Author:

Andy Graham is the founder and the lead trainer at The HMO Roadmap! He is also the co-founder of The HMO Mastermind and Smart Property, a specialist HMO property investment and management company. He writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!