Buy To Let Finance
Buy To Let Finance | The Facts About House of Multiple Occupancy
The buy to let finance picture has recently changed with the introduction of new legislation regarding houses in multiple occupancy (HMOs). Those seeking finance should know that an HMO is a dwelling that is occupied by more than one household and is the main residence of these households. In addition, people living in an HMO usually share basic amenities such as cooking facilities, toilet facilities or bathrooms.
People interested in buy to let finance should know that accommodation over shops, bed sits, part converted houses and the houses usually shared by students are examples of HMOs. HMOs must comply with legislation about electrical, gas, fire and furniture safety. However, there are additional standards for HMOs under the Housing Act 2004 and it is these standards that have implications for buy to let property finance.
In an attempt to make sure that amenities provided are of a suitable standard, and in order to prevent overcrowding, HMOs must now be licensed by the local authorities, and some providers of buy to let finance have rules relating to these types of dwellings. The five year local authority licence is charged differently in different local authorities, with several hundred pounds' difference between the top and bottom ends. When adding up buy to let finance, landlords will be interested to know that some local authorities were charging around £150, while others were charging more than £1,700 for HMO licensing.
BTL Regulations
Landlords who are getting finance must think not only about the cost of the license, but also the cost of meeting the new regulations for buy to let properties. This could affect their buy to let property finance and it is one reason why many landlords are choosing to leave the HMO sector. Although student lets have traditionally been popular with landlords getting buy to let property finance, some landlords are wary of the new requirements. This is also true of some providers of buy to let property finance, who have imposed new lending criteria in the wake of the legislative changes.
Some lenders who provide buy to let finance will not lend for HMOs at all and this was one consequence of the new legislation that many analysts had foreseen. Other lenders provide HMO finance for landlords with large portfolios and still others are imposing lower loan to value ratios for property of this type. There are even some finance providers who will not lend until a license is in place, effectively preventing some landlords from getting finance for HMOs. This is because landlords can only get a license when they own the property.
Meanwhile, there are still opportunities for some landlords in the right circumstances. If they are among the lucky few who buy property in local authority areas with low HMO licence fees and a relaxed approach to regulatory compliance, they could be on to a good investment, especially if they can also find a lender who will issue buy to let finance in this sector.
