Doing HMO on BTL mortgage – consequences?

Doing HMO on BTL mortgage – consequences?

0:03 AM, 20th January 2023, About A year ago 3

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Hello, A client of mine has a BTL mortgage and for various reasons cannot find a tenant. They are looking at doing the house as a HMO instead as there’s more demand, however their mortgage company doesn’t offer HMO mortgages and re-mortgaging would be prohibitively expensive due to rate increases.

What could happen if they do HMO but don’t tell the existing BTL lender?

And then the lender finds out?

They are in breach of the contract, what would the mortgage company realistically do based on the hassle and impact for lender?

Thank you,


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15:11 PM, 20th January 2023, About A year ago

Best to divulge all the Facts and remain truthful, that way one sleeps better at night ...
If it invalidates your insurance, it invalidate your HMO Licence and the hmo officeralways check to see of you have insurancein place (in Scotland anyway ) and may leave you open to whatever .
Thats a whole nasty tin of worms .

St. Jims

8:45 AM, 21st January 2023, About A year ago

If the place burns down, the insurer may refuse to pay out.

If the mortgage company find out, your client may be be marked down as a de facto fraudster; they may have trouble getting mortgages in future.

The mortgage company can demand immediate repayment of the loan, if they feel like it. That may mean bankruptcy for anyone in substantial negative equity, although in practice it usually means the house is auctioned off at a discount.

If the tenants find out and are canny, they can blackmail the landlord. Not many would, but they’re out there.

Not worth it.

Rob Crawford

13:35 PM, 23rd January 2023, About A year ago

What size HMO? f its a small HMO (say 4 bedrooms) it may not be an issue, but you need to find out. As already discussed, to proceed without informing your lender or insurer could have serious consequences! Best to ask them the question.

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