Photo by HemCo Property Investments

This month, I’ll be addressing some of the common myths that come up in conversations with my clients as a Specialist Mortgage Broker – those misconceptions that, upon closer inspection, simply don’t hold water.

My goal is to provide you with clear and accurate information about mortgages so that you can make informed decisions about your financial future.

Myth 1: You need to own your own home or already have a BTL to get a BTL or HMO mortgage.

Yes, it does make things easier, but no, you don’t actually need one. If you’re tight on deposit funds, you’ll need to balance out the increased rate on your BTL or HMO mortgage against the money you’d spend on buying a property you don’t really want. Then, you’ll have to find more money for your next deposit on the property you truly desire. We have options with a few lenders (depending on your property and purchase) – including one who considers commercial valuations on smaller HMOs.

The first time you do something, it’s not likely to be the most streamlined or cost-effective. So adding in a slightly higher interest rate is one of those things. We’ve done it for plenty of clients who have gone on to build large portfolios with more competitive rates!

Myth 2: Limited company mortgages are more expensive.

To some extent, this is true, but there isn’t much in it once you own a few properties or when you become a full-time landlord with no non-property income. What’s more important is your tax position and long-term goals, so it’s always worth speaking to your accountant for advice tailored to your circumstances. Once we know that, it’s our job to find the right mortgage for you.

High street lenders won’t consider HMOs or blocks of flats, meaning you need a specialist lender. They also won’t allow deposits from inter-company or director’s loans, which are also for specialist lenders.

To balance this out, specialist lenders typically require less and offer more flexibility in many aspects. You should also be able to secure your mortgage more quickly, although this also depends on solicitors!

Myth 3: Bridging isn’t worth using.

This is something I strongly disagree with! Yes, it adds expenses to the deal, but if the numbers work, it offers numerous advantages. It allows for a quick purchase, irrespective of planning or mortgageable condition, and enables you to realize the uplift in value swiftly.

As with anything, it must be profitable to make the bridge worth it. If you’re looking to refinance to extract money and make another investment, then it’s something you’ll need to use. It opens up numerous other property opportunities, even if the property isn’t in a mortgageable condition, which is particularly helpful if you’re planning a refurbishment.

Lenders are cracking down on borrowers using standard mortgages to carry out property works, something they dislike. So be upfront and do things the right way!

Myth 4: The lowest rate is always the ‘best option.

When considering your mortgage options, I always recommend thinking about where you want to be in five years and working backward from that point. Releasing more equity, or doing it quickly, could be beneficial. So could choosing a lender who is more flexible regarding experience. There’s much more to it than just looking at the rate, so be cautious with quick comparisons and seek the whole story.

Myth 5: Going directly to a lender can save me money.

So, why do you need a good broker in your power team? Our role is to work with you to find the mortgage that suits your needs. Most specialist lenders are broker-only, so you’ll miss out on numerous options by going directly.

We’re also here to validate your deals, ensuring the GDV works and your rental income aligns with the lender’s requirements. Valuation methodologies vary widely from lender to lender, so we can help guide you towards the most appropriate lender for your property.

I hope you find this information useful. As always, please don’t hesitate to contact me here if you’d like to discuss anything specific!

About the Author:

Ellie Broadhurst is a specialist mortgage broker working at Baya Financial in partnership with The HMO Roadmap. She works with HMO property investors throughout their journey, from clients starting on their first project through to experienced portfolio landlords and developers. Learn more about Ellie here.