Stuck letting out a property as HMO with a BTL Mortgage

by Readers Question

9:39 AM, 19th April 2016
About 3 years ago

Stuck letting out a property as HMO with a BTL Mortgage

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Stuck letting out a property as HMO with a BTL Mortgage

Hi, I currently have a BTL mortgage with Natwest for a property I purchased last year. However I have decided to apply for a HMO license, which I believe is outside the scope of my mortgage. stuck

My purchase price was 170K with the deposit being 35%. My HMO application requires me to inform the mortgage company of my intention, which would invalidate my mortgage.

What are my options please?

Haider



Comments

Neil Patterson

9:42 AM, 19th April 2016
About 3 years ago

Hi Haider,

If the BTL product prohibits letting as an HMO you would be in breach of your mortgage contract if you did not tell them. That does not mean it is impossible they could agree to this.

However if they won't play ball the lender may have another product you could move to or worse case scenario at 65% LTV remortgaging is your other option.

Ian Narbeth

10:43 AM, 19th April 2016
About 3 years ago

Consult a good mortgage broker. You are not the first person in this situation. The broker can help you find a suitable mortgage product. I don't know if Nat West do HMO mortgages - most of the big banks don't though Lloyds do lend to companies with HMOs. Unless Nat West has a mortgage you can move onto you will have to pay fees to move.

If you breach your mortgage terms you will end up with a black mark on your credit record.

Mark Evans

10:47 AM, 19th April 2016
About 3 years ago

I had something similar recently on my two BTL houses in Brighton. The council have expanded their HMO licensing scheme so I had no choice but to apply for a licence and hence my lender was notified (Platform). They did initially send me a letter saying i was in breach of my mortgage. I had my broker call them and I wrote to them - it now seems settled as OK, but this is mainly because in effect it is not full HMO - I still have a single AST contract per house for four sharers and that seemed to be the key for them. I would suggest talking to your lender or have your broker do it - they have "rules" but these are sometimes flexible. My broker did also tell me there are still some BTL lenders who do HMO loans - in Brighton it is a booming business with HMO houses being sold for way over market value!

St. Jims

12:07 PM, 19th April 2016
About 3 years ago

We were in the same boat - we'd taken out a non-HMO BTL mortgage with The Coventry Building Society, and then we decided to convert to HMO. We thought we'd have to change mortgage providers but in the end The Coventry basically said we could stay with them as long as we didn't ask for any more money. Just because a mortgage provider doesnt advertise HMO mortgages doesn't mean they won't tolerate them - after all, for them the alternative is that they lose your business. We were lucky there and I hope you get lucky too: for us the increased cost of an HMO mortgage is equivalent to one room's gross annual income, so it's worth asking for their permission.

Sandy Down

10:13 AM, 20th April 2016
About 3 years ago

I was in the same position, but the last letter I got from my mortgage provider seems to include HMO's... most importantly, do not forget to change your house insurance to be for HMO not as BTL ...

John Constant

9:02 AM, 23rd April 2016
About 3 years ago

Haider,
notifying the lender is obviously the right thing to do here, but as others have said it is not necessary a route to automatic trouble and hassle. Don't forget that Nat West are a mainstream bank with a Commercial division too. I'm not sure what ERC's attach to your existing deal, but it might be possible to switch to a "HMO friendly" commercial deal with Nat West, who might take a sympathetic view of the ERC's.(though not likely!)

If it transpires that you are faced with no other option but to change lenders, I assume that your property may have risen in value since purchase, so you may well have a 40% deposit by now. In which case, there are some attractive rates available.

I will not presume to know your particular financial circumstances, but it may be possible to secure a BTL HMO 2 year fixed at just 3.14% with a £1995 arrangement fee and a £150 booking fee. This particular mortgage is available to 65%LTV.

Should you need assistance with this further, please contact me at HD Consultants via Neil.


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