A HMO, standing for House in Multiple Occupation, is a single dwelling that is let out to 2 more or tenants (that are part of separate ‘households’ of people that are not connected to each other) and who share facilities such as a kitchen or bathroom.
If there are 5 or more unconnected parties, this type of letting requires a mandatory HMO licence which needs to be obtained from the local authority. However, some local authorities require a licence even where there are less than 5 tenants under ‘additional’ or ‘selective’ licencing. You should always look to speak to the local authority to check their requirements when you are thinking of a new BTL purchase.
If the BTL property you wish to acquire needs a licence, you will need to meet the conditions of the licence such as fire regulations, and you will need to find a lender that will lend on a HMO property. Connect Mortgages can help you find a suitable HMO lender, contact the Connect team for help.
This is sometimes referred to by the lenders as an MUB (Multi-Unit Block) or MUFB (Multi-unit Freehold Block). This is where a single freehold property has been divided into self-contained flats. Although they could be small flats such as studios, being self-contained, with their own kitchens and bathrooms, they would not normally require HMO licences.
Where there is just the one legal freehold title at Land Registry, only one mortgage is required, even if there are several self-contained flats. A specialist lender can assist with this type of property.
Some investors look the create ‘individual’ properties but creating long leases on each flat. This has the benefit of individual records at Land Registry, so each individual flat can be mortgaged or sold. Contact one of our specialist mortgage advisers who can help you to compare the options for mortgages on this type of complex property.