New regulations to rules affecting Houses in Multiple Occupation (aka HMOs) are set to be introduced 1st October 2018 which means it could become more difficult to remortgage or obtain the right level of finance after this key date.
With Standard Variable Interest Rates typically higher on HMO Mortgages compared to traditional Buy To Let Mortgages, it is vital that if you are looking to remortgage then it really is the case that “sooner is better” as one leading specialist buy-to-let lender claims that there will be a large increase in landlords applying to refinance their portfolios in the lead up to these changes.
Stuart Marshall, Managing Director at Liquid Expat Mortgages, a specialist UK expat and foreign national mortgage broker, knows from experience that regulation changes can impact negatively on Buy to Let Mortgages. “Over the last ten years Liquid Expat Mortgages has seen that the introduction of any new regulations can affect landlords by making it harder to remortgage and possibly paying more on Buy to Let Mortgages which over the last 18 months has seen a 63 % increase in HMO BTL enquiries at Liquid Expat Mortgages. This has not only been down to the fact that HMO’s are very popular with Expat investors as they tend to have higher rental yields and returns as opposed to traditional BTL investments, but is also because as Britain adjusts to its growing population and legacy of inadequate homebuilding, the demand for rental property continues to grow.”
“It’s important that Buy to Let investors who feel they might be affected by the HMO regulation changes do not wait until the changes come into effect to review their BTL mortgage . They need to be aware of their options as soon as possible. Not only does Liquid have years of experience in HMO Mortgages for Expats, it also has the largest panel of lenders accepting expat offshore HMO applications so it has been able to gauge the rise in popularity at very close quarters.”
According to The Residential Landlords Association (RLA) it is believed that 177,000 properties are likely to require licences once the new regulations are introduced later this year. It is important to understand the basis of these changes as they will no doubt impact on HMO Landlords and investors.
A House in Multiple Occupation – or HMO – is typically a property where three or more unrelated people from more than one household live together and share a toilet, washing or cooking facilities. This covers a large spectrum of property types such as large shared properties, converted flats and privately operated halls of residence which under current rules means only a limited number of landlords need licences for their properties.
However 1st October 2018 sees the tightening of HMO licensing rules with smaller properties and minimum living space standards coming into force meaning more landlords this year more landlords will be forced into taking up a license.
Some of the key changes are;
- Minimum room sizes in bedrooms used by one adult must be a minimum of 6.51 sqm
- Minimum room sizes in bedrooms those used by two must be 10.22 sqm
- Bedrooms occupied by children aged 10 or younger must be at least 4.64 sqm.
- HMOs which are less than three storeys will need to be licensed
- Flats in converted buildings as well as flats above and below shops will need to be licensed
These minimum limits can also be increased at the discretion of the local authorities so landlords and investors really do need to check before 1st October 2018, not only the properties, but any current mortgages or finance held against the property. Even Landlords who already have licences will need to ensure their properties are compliant if they plan to renew a mortgage or re-finance after this date.
“If a landlord waits until after the regulation changes have come into force and the property is not compliant a lender may well take the non compliance into account when re-assessing a re-mortgage. For example a lender will not use as part of its base rental stress calculations any rental income from the bedrooms that do meet local licensing rules. That is not good news ”, says Stuart Marshall, “as it means obtaining the required level of financing becomes so much more difficult and could end up being much more expensive for the Landlord especially if they are on a Standard Variable Interest Rate
If you have a HMO –or are thinking of purchasing a HMO property – and want to understand more about how the changes might affect you please contact Liquid Expat Mortgages for a FREE and confidential consultation from an expert and experienced mortgage adviser call +44 (0)161 871 1216 or email firstname.lastname@example.org