Why HMO and holiday let owners need to choose the right lender


Landlords running specialist rentals like HMOs and short-term or holiday lets can reap bigger rewards than in traditional buy-to-let. But it’s also more imperative to make the right choices. 

The alternative and specialist buy-to-let mortgage market is arguably booming at the moment. Like the rest of the lending sector right now, loans are historically incredibly cheap. For HMO (houses in multiple occupation) landlords, as well as those who run short-term and holiday rentals, it’s a great time to borrow to buy.

According to Mortgage Broker Tools, although options are plentiful and rates are low, it is extremely important for specialist landlords to secure the right mortgage. There can be huge variations between what lenders will offer and the terms available, and HMO and holiday let owners can end up overpaying if they opt for the wrong one.

Growing popularity of HMO and short-term let investments

In recent years, these specialist property types have proven more lucrative than ever for many landlords. The yields on offer can be huge in the HMO field, and there is the added benefit of less void periods when people come and go as rooms are let out separately. While there can be more work involved, too, and HMO licensing is a consideration as well as additional regulation, it is still worth it for many landlords.

Likewise, many buy-to-let landlords turned to holiday lets and short-term lets due to a range of tax advantages that can make it more lucrative than long-term lets. Again, this is not the answer for everyone, but many have seen huge success through the likes of Airbnb and other holiday home portals on their properties. This has been even more prominent since the pandemic, with the rise of the “staycation” increasing demand in UK holiday lets.

With the growth in popularity in these two avenue has come a rise in the number of products on offer, and the number of lenders willing to lend to these property types.

Comprehensive research is key

Tanya Toumadj, CEO at Mortgage Broker Tools, said: “Mortgage Broker Tools offers by far the most comprehensive buy-to-let affordability results of any provider in the market. Now, we can show that choosing the right lender makes a bigger difference on specialist buy-to-let investments, such as HMOs and holiday lets, which are becoming more popular due to the bigger yields they can deliver.

“This is because of the variety of ways that different lenders will calculate affordability on these types of investments. Some lenders, for example, will calculate affordability based on the property being let on a standard AST, even though in reality, it would have a greater earning potential.”

“Criteria is also key for specialist buy-to-let investments as there are many nuances that can impact whether or not a lender is able to lend on a property. So, comprehensive research at the outset is a must for brokers who want to take advantage of this growing opportunity and the best way to do that is with the most comprehensive platform available in the market.”

BuyAssociation has a range of HMO and short-term let properties available to investors, as well as traditional buy-to-let. Browse some of our current investment opportunities or contact us for more information.

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Why HMO and holiday let owners need to choose the right lender


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