Property owners or landlords who own rental properties often have a difficult time securing funding for renovation projects since they are not traditional properties.
This is especially true in the situations where HMO, or Houses in Multiple Occupancy, properties are owned. For these types of circumstances, HMO Refurbishment Mortgages may be a viable solution to a landlord’s renovation funding problems.
This type of financing can be used for both HMO and Multi-Let or Multi-Tenant Buy to Let properties. But, before applying for this type of mortgage, it is important to understand some of the funding details.
HMO Refurbishment Mortgages are sometimes very specific about the renovation types they cover. Some examples of the construction covered include updates to common areas of the property including the kitchen, bathroom and living room, window and door replacements, electrical updates, fire safety device replacements, and some interior and/or exterior redecorations.
One of the terms of securing an HMO Mortgage is that all listed renovations must be completed within six months of receiving the mortgage. Once the refurbishments are complete, the landlord or property owner will then be required to obtain an HMO license and lease all the rooms in the building to tenants.
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HMO Refurbishment Mortgages are traditionally used to fund necessary renovations to large, multi-room properties. These properties should not be currently covered by an HMO license or have any current tenants living in the building.
Because this type of financing does not require the borrower to have an existing HMO license or any proof of previous rental income, it provides a great opportunity for new landlords to begin their portfolio while securing the funding to meet their building construction needs.
HMO Refurbishment Mortgages will generally cover up to 60 percent of the property’s purchase price or value and allows the property owner to make necessary renovations without holdings.
HMO Refurbishment Mortgages are best suited for landlords or property owners looking to begin their rental portfolio or expand upon their existing portfolio of rental properties. This funding can be used for a number of different property sizes and configurations that are in need of construction work or property upgrades.
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Property owners who are looking for higher rental incomes can also use an HMO Refurbishment Mortgage to update the property or to fund the construction of a property that is currently unliveable. Using an HMO Mortgage helps the borrower to avoid the expensive rates associated with Bridging Finance or Bridging Loans, which are often used for this kind of project.
Some of the same lenders who offer HMO Refurbishment Mortgages can also offer borrowers Conversion Finance with similar LTV, or Loan to Value, rates and financing and repayment terms. Renovation Finance is another option for these projects – lenders we work with understand that there are milestones that need to be met throughout a construction project.
For more risky renovations, financing can be arranged that will start off with lower LTV rates, offering lenders more security. When the renovation is complete, the property is reevaluated and a cash sum is released reflecting the higher Loan to Value rate, allowing a landlord to free capital that will assist on the next project.
Our friendly FCA-Qualified advisers will help you get the right product for your circumstances.
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