Mortgage query for house purchase that isn't yet an HMO?!

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    Mortgage query for house purchase that isn't yet an HMO?!

    Hi all,

    I'm looking to buy a terraced house which isn't currently an HMO, but I'd like to convert it to an HMO and apply for a licence from the local council (which will be required due to Article 4).

    No guarantee that licence will be granted (subj to a consideration on if there are 20% HMOs in the area).

    So my question is, what sort of mortgage do you go for in that situation.

    A normal buy to let mortgage? (but then you'll be in breach in the mortgage if you get HMO licensed?)

    Or an HMO mortgage (but it isn't an HMO yet and might never be).

    This must be quite a common issue - I'm sure someone can clarify for me, I just don't know the answer as never done it.

    Regards

    Clulass.

    #2
    What options did your specialist BTL mortgage broker suggest?
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

    Comment


      #3
      You're going to try and convert a terraced property into an HMO while there's an article 4 declaration in place?

      I don't think the funding is your biggest issue.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        Much will depend on the lender and it’s criteria towards HMO’s, if you are a novice landlord then the majority of lenders would not grant an HMO mortgage and if the application were made for a single occupancy BtL and then received notice from the Council of an application being made then they would contact you and if their criteria required a history of owning and running at least one property as a BtL there is every chance that they will put a restriction on the property having to remain as a simple BtL and police it for any infringement, if you then chose to ignore the caution and were discovered the loan would be called in.
        Your broker needs to engage on your behalf with lenders and be transparent of your intentions , only then could you progress to realising the change from single useage to a modest HMO.

        Comment


          #5
          OK thank you.

          Comment


            #6
            theartfullodger broker said it depends what level of work is needed re planning application and that some lenders will lend on the basis of the planning application. But that didn't really answer of getting the loan to purchase the property.

            Comment


              #7
              Your broker doesn’t advise correctly.
              1st what property experience do you have in terms of BtL,if zero then there are only a minority of lenders who would consider such an application , for some your broker is correct in so far as the acknowledgment of an HMO application is sufficient to proceed to Offer, others and these are in the majority require an HMO license to be approved and registered and fully comply with the requirements as laid down by the council
              If however you are initially intending to buy as a single dwelling unit , the rental would be based on a single family occupancy and rental, if you then decide to apply for a license then my comments in my previous response apply .
              It is unfortunate that there are brokers who profess to know everything about mortgages including BtL’s but if 95% of their clients are residential applicants there is no way that they can understand the complexities associated with HMO’s , MUFB’s and where appropriate Limited Company.

              Please do respond with more details as set out above so that a more considered response can be given , on a worse case scenario you might need to bridge the purchase , undertake the works and obtain the requisite license before being in a position to apply for an HMO Mortgage,this might be the extreme solution but we are here to help you when clearly your broker is failing to answer your questions.

              Comment


                #8
                I am in a similar position, but am on bridging - which has been extended once, absolute deadline to move off is mid May - so 2 3/4 months away.

                I am already an HMO landlord of many years, with one licensed HMO under my belt.

                Property is being converted to two flats, for which planning permission has been granted, and is coming to completion within the remaining time bridging will allow.

                I plan on the ground floor being mortgaged as a single BTL, but will apply for the 1st and 2nd floor 3 bed flat to be a 4 bed HMO, I am in an article 4 area.

                I plan on making a Pre-app to sound out the council, but know that is not a fully considered application, so if they say no, I will stiil make a Full Plans app. This process may take more than 2 3/4 months - my broker has advised he needs to know very shortly the direction I am to go in before making applications.

                I may not know this within the time period my broker is suggesting to start looking, as i doubt I will get a decision in time on the planning application.

                Are their 'flexible' products on the market, what is the situation if I am still in the middle of the HMO application, and need to move ... the property will be completed as far as works are concerned (and will have everything an HMO needs).

                I remember Shawbrook offered a mortgage that would start as a 'development' mortgage (not that i will be developing- works will be completed), and could could transfer to a term mortgage after.

                Presume a non redemption penalty mortgage, and redeeming after just a months is not acceptable - if I went normal BTL but then needed to change to HMO specialist mortgage.

                Any opinions appreciated, Thanks.

                Comment

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