Buy-To-Let and HMO mortgage lending criteria

Buy to let mortgage and HMO mortgages (criteria and products). Being a landlord has long proved profitable. It has tended to be dominated by the wealthy or by large companies owning many properties, but there has always been also the smaller landlord renting out just one or two properties.

Over the long term, rents and house values have tended to increase in line with wages – but with house prices also showing some short-term sensitivity to interest rates because much house buying depends on mortgages and their interest rate costs. So rents and house values have long tended to rise, with some fallbacks, about as below ;
Buy To Let mortgage deals and properties for HMO investors. House values graph: The average UK house price was £256,000 in July 2021, This is £19,000 higher year on year further to the record high of £265,000 in June 2021. However this was slightly down on the January 2021 figure of £266,532.
UK House Price Growth

But wages and interest rates are not the only things that can affect house values and rent levels. There can be times when the number of new households wanting housing grows faster or slower than the number of new houses being built. And while population tends to grow, the land available for housing may not grow as much. While developers have frustratingly sat on land (land banking) with impunity thus skewing housing data. So average house prices in the UK in recent years have increased much faster than wages, but nobody knows how much longer that may continue. House prices may also do much better for more popular locations and property types, and badly for those becoming less popular.

Buy To Let mortgage deals and properties for HMO investors (High Yield)

Renting out property has always been at least a reasonably good longer-term investment especially because increasing property value is generally not taxed. And if house prices are rising much faster than wages, then owning property can be extra profitable. Of course house prices do sometimes fall for a time, so as a short-term investment property can certainly involve some real risk. If interest rates rise sharply and property values fall at the same time then this can create problems for some property investors that may take some years to come out of. This is why a property investment needs to be for at least 10 to 15 years to give assured profit.

In early 2017 when this post was first written interest rates in the UK were historically low. In November 2017 the rate was increased by .25% of a basis point to .50%. Property prices are high relative to incomes – but it may well be 2018 or later before property prices start falling again. So 2017 was a time to favour longer-term Fixed Rate mortgages over Variable or Tracker mortgages, and both are now often also available cheaply as Flexible or Offset mortgages.

When considering buy to let mortgage deals and an HMO mortgage there are a number of ways to source. You can use our buy to let mortgage calculator that is available online or by visiting a broker (online or physical) or lender direct. While an interest-only buy to let mortgage may be perfect for keeping your monthly costs down no capital is repaid. The other consideration is, while somewhat negative, consider a rental void and the recent pandemic while servicing the loan from your income. The importance of a main income. Also remember the product available will be determined by your credit rating. Run a credit check on yourself prior to application. Buyto let Mortgage Deals

In relation to current events, there have been several changes in UK legislation around buy-to-let mortgages, with lenders required to assess borrowers’ ability to repay interest rates set at 4% or higher. It is important to make sure that you are doing your research before investing in one of these mortgages. A fundamental legal issue to address is the HMO licence. These laws were updated in October 2018 and reportedly affected around 177,000 properties.