How can I get a bridging loan for an HMO?
Houses of Multiple Occupancy or HMOs have become increasingly sought-after by investors recently. These investment opportunities can be very lucrative, but many people need to get access to property development finance before they can take advantage of them. If you’ve been wondering “how can I get a bridging loan for an HMO?”, you’ll find a great deal of useful info right here.
Why are HMOs so lucrative?
A big reason why people are opting for HMOs rather than conventional buy-to-lets is that they can charge per room instead of for the entire building. This means they can give you a bigger return on investment if you purchase a rental property. Lots of entrepreneurs have been transforming properties that would normally be rented out to families into houses of multiple occupancy to boost their rental income.
What exactly is an HMO?
A property can be regarded as a house of multiple occupancy is it’s shared amongst people who aren’t related to each other and has common areas like kitchens and bathrooms. These homes are often shared by people who are yet to start families including young professionals, although it’s not uncommon to see older people living in them too.
Are there different types of HMOs?
If a house has less than five tenants and has less than five tenants sharing facilities, you won’t need a licence to rent one out. However, you will need a licence from your council and you’ll have to pay an application fee if you are renting the HMO to five people or more.
Who can help if I want to finance an HMO quickly?
The traditional mortgage application process for an HMO can be lengthy. If you want to invest in an HMO but don’t have time to waste, quick access to funding be very handy. You could get access to the funds you need within a few days or weeks rather than months. Bespoke products designed around your circumstances may be available if you want to purchase an HMO.
Is it tough to get a mortgage for an HMO?
Do you have multiple buy to let properties in your portfolio? If so, it could be difficult to get a mortgage as you won’t be able to spread equity across the properties you own, especially if properties within your portfolio aren’t making much money. When you apply for a traditional mortgage, the lender will look closely at your whole portfolio to see how profitable each property is. Once your HMO is ready for tenants, many borrowers refinance onto a standard rental mortgage using bridge-to-let loans UK
Stress testing and buy-to-let
Stress testing is a method preferred by many lenders who want to find out how able landlords are to pay their mortgages during tough times. This method is designed to ensure the income they get will cover their mortgages even during the most challenging periods. The higher your stress rate is, the tougher it can be to get the finance you need. However, a bridge loan could be the solution you need if conventional lenders aren’t playing ball and you want to finance a new buy-to-let.
How can a bridging loan solve the problem?
Bridging loans UK are designed to help people who need short-term finance and can give you access to finance within days or weeks rather than months. There are many big advantages to taking out bridge loans when you want HMO finance. These include not only the swift access to cash you’ll get but the way you can pay the interest at the end of the agreement.
With bridge loans, lenders don’t focus on your credit score as much as they do when you apply for conventional loans. A strong exit strategy can help you gain access to an HMO loan. As long as the loan is secured against an asset, you can reduce the risk to the lender and greatly improve your chances of being accepted. Many people include the sale of homes and other assets as part of their exit strategies.
Will I be charged for early repayment?
A major reason why bridge loans have become so popular is that you won’t normally be penalised for paying them back early. If you take out a 12-month agreement but pay the HMO bridge loan back within three months, you’ll only have to pay three months of interest.
How does LTV work?
You’ll usually be able to borrow up to 75% of the value of the property you want to borrow against. Are you working on a bigger HMO project? If so and you need a larger loan-to-value ratio, you could use other assets in order to get an 80% LTV loan.
Why not use our Bridge Loan Direct calculator today to see how much an HMO loan could cost you?
How we can help
At Bridge Loan Direct, we have an excellent track record when it comes to helping landlords to get HMO finance. We are passionate about getting the best terms and interest possible and we are only happy when you are totally satisfied. We do all we can to remove any obstacles that you might encounter, and we have a panel of more than 300 lenders. This makes it much easier for us to find the right solution for your needs.
Most bridge loan lenders don’t work directly with the general public, but we can use our experience, contacts and expertise to get you the best deal possible. These deals will be tailored directly towards your specific requirements. We are here to help you expand your property portfolio in style.
