A First Time Landlord will typically start by buying a traditional Family Let. However, some are tempted by Multi-Let or a House in Multiple Occupation (HMO). Sure HMOs are more work but can generate a higher revenue at full occupancy than letting to a single-family. Except it's a big step from managing 0 tenancies to managing 4+. Mortgage lenders reflect this in criteria, with many having minimum years of experience required.
Out of the 84 mortgage lenders questioned (April 2022), only 14% will allow HMO Mortgages to First Time Landlords (FTL).
- 14.3% of Lenders Accept First Time Landlords.
- 4.8% of Lenders require 2 Years of Lettings Experience.
- 17.9% of Lenders require 1 Year of Lettings Experience.
- 83.1% of Lenders do not permit HMO Mortgages.
That 14% compromises mainly of Specialist High Rate Lenders. For example, West One, Together, Roma and Octopus are better known for short-term finance. They do HMO Mortgages and allow First Time Landlords but are at the higher end of the HMO Best Buy Tables.
We do have some more competitively priced HMO Lenders in that 14% but have other criteria, such as limiting the Loan-to-Value to 70% or maximum bedrooms of 6.
Only a few require 2 Years of Experience, such as the HMO Mortgages team at Leeds Building Society.
Most HMO lenders need 1 Year of Lettings Experience - with recognisable names such as Fleet Mortgages, Kensington, LendInvest, Precise Mortgages, Vida and Zephr.
To get the most competitive HMO Mortgage Products and increase mortgage options, first, gain experience with a Family Let Rental for at least a year.
Only one applicant requires experience as a Landlord, a First Time Landlord may look at Joint Venture options with a more experienced Landlord.
Mortgage Lenders will not accept historical experience. They want to see that you have ongoing lettings experience or within the last few months.