Do HMO and Buy-To-Let properties require different Mortgages? | Q&A Series

Reading Time: 2 mins

Yes. 

Whether you go directly to a Bank or use a Mortgage Brokers, something many Buy-to-Let property owners will find challenging is having a HMO.

What is a HMO?

A Household in multiple occupation. 

This means that a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’. … You must have a licence if you’re renting out a large HMO in England or Wales.

REMORTGAGE

Before your Mortgage Broker approaches or advises that you submit an application with a particular lender, it is important that you understand that lenders policy. This is because you could go through the credit search, application process and find out that your application is rejected once the valuation is carried out. This would be down to the fact that the surveyor has observed that your property isn’t a conventional BTL property, but a HMO.

PURCHASE

Ideally you would of applied to your local council for a HMO licence during the negotiation/Purchase Offer stage as the licence can take a while to come through. 

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What is the difference between using a Mortgage Broker vs. Going direct to the Bank? | Q&A Series

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Reading Time: 7mins

In 2015 my mother gave me some great advice. She knew that I had the desire to get my foot on the property ladder and as I had no idea where to start, she advised me to go to the Bank with my then fiancé and see what we were “worth”.

As my fiancé worked for HSBC at the time, we booked an appointment with a Mortgage Advisor, disclosed our salaries, savings, commitments etc and based on our situation she gave us a flat maximum amount that we’d be able to borrow.

This meant that regardless of what property we found, that’s the maximum Mortgage amount that we qualified for.

I can’t remember what that max lend was, but let’s just say for arguments sake that it was £300,000. This means that even if there were mortgage deals at HSBC where you could get a 90% Mortgage with a 10% deposit and the property we sought after was £450,00, we would have to cough up £150,000 and not the simple 10% deposit of £45,000 that the product suggests. This is due to what we were “worth” and the maximum HSBC was happy to lend to us based on our salaries, credit score etc.

I hope this makes sense.

Here’s where Mortgage Brokers come in to play…

There are numerous High Street Lenders, and I suppose my finance and I could of gone up and down the streets from various bank to the next getting a rough idea of what they’d lend us, but this is extremely tedious and time consuming.

Our next point of contact was a Mortgage Broker which my finance found on Google – Alexander Hall.

We got in touch with a Mortgage Broker who was amazing! He offered an amazing service and until this day, I still remember his name.

The Mortgage Broker took more or less the same information we provided to HSBC and sourced which lender would give us what we were looking for.

“Source” the phrase used to describe the action taken on a system similar to Google for lenders. Most lenders are on this system and the great thing is that some Mortgage Brokers get exclusive rates and deals from lenders. For example the lowest rate at TSB if you were to walk in to a High Street Bank could be say 2.04% however with a broker, they have access to exclusive interest rates like 1.69% for TSB opposed to the 2.04% High Street rate. That’s a huge difference!

To cut a long story short, the Broker found us a lender that was willing to lend us way more than HSBC and we were able to then look for an affordable property, make an Offer and secure a Mortgage.

Round up.

The 3 Major difference between a High Street lender and a Mortgage Broker are:

1. Time

High Street Lender

They tend to have a 2 week wait for you to be able to secure an appointment with a Mortgage Advisor.

Application to Mortgage Offer can take anything from 1 Month – 6 Months.

Broker

For many no appointment is needed. You can get in touch with your Mortgage Broker over the phone/on email with the option to book in a face to face meeting if that’s your preference. However some brokers require face to face interaction like Capricorn Financial and Alexander Hall due to verification etc.

You also have the option to do everything online and through a chat window. Convenient and no need for any face to face interaction or time consuming meetings. Brokerages like Habito and Mojo operate in this kind of manner.

Application to Offer can take anything from 3 working days to 21 days. (I’ve seen case where a full Mortgage Application was submitted and an Offer followed immediately after due to the lender being able to verify the applicants electronically and carrying out a desktop valuation) – rare but possible.

2. Interest Rates

High Street Lender
What you see is what you get.

Dependent on the Bank of England base rate.

Not many options

Broker
Options galore.

You can play with the term length and Mortgage features (E.g cash back, free legal representation, split terms, payment holidays)

The Broker will be aware of when new rates are going to be introduced/when old rates are going to be pulled off of the market.

3. Convenience

High Street Lender
They will require hard copies of documentation

Proof of ID

Proof of Address

Bank Statements etc.

Broker
Hard copies of documentation not required

PDF copies acceptable

The convenience of being able to email across any additional information required from you.

Some people don’t like the idea of using unpopular lenders like “The Mortgage Works” or “Atom”, but if getting value for your money is important to you, I highly suggest using a Mortgage Broker.

5 Year Plan

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Reading Time: 5 mins

So today we are going to discuss the 5 Year plan and the importance of having a plan. My 5 Year plan has never failed me and I have always accomplished what I’ve set out to achieve.

When I was 16 I started my 5 Year Plan and was able to achieve every single goal throughout the years and when time seemed to be closing in on me, I attained my final goal days before my 22nd Birthday.

So let’s dive right in to it, what type of goals did I set and how did I go about achieving them?

I had my key goals and these were broken down with sub goals or you could almost call them sub tasks that would catapult me closer to the main goal.

  1. Buy a House 21
  2. Start dating and be engaged 21
  3. Pass my driving test 21
  4. Be in my career job 21
  5. Gain weight 21
  6. Overcome complexes and step out of my comfort zone
  7. Be mentally strong. If you stand for something, don’t let an institution, work or anyone shake/break that.

As you can see, my goals were pretty vague, however the older I got, the more padding I added to them and by the end of the 5 Year period, I was in a much better position than I thought possible.

Over time, my goals became SMART:

  • Specific
  • Measurable
  • Attainable
  • Realistic
  • Timely

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  1. I completed on the purchase of my house 14 days before my 22nd Birthday
  2. I started dating at 19 and got engaged at 21
  3. I passed my driving test at 21
  4. I started working in a huge Financial Institution at 20 and embarked on my Mortgage Career
  5. I went up a dress size
  6. I overcame all personal weight related insecurities and my dress sense affirmed this!
  7. I’ve always been head strong, but I started to become apologetic about it and almost lost my own opinion and stance on given situations hence the goal. By 21 I was definitely mentally stronger and began to challenge the status quo. I stopped saying “yes” and started asking “why”?

Once I had achieved all of my goals, I began thinking about my next 5 year plan. I looked back on all that I had achieved, was extremely proud of my 16 year old self and decided to up the ambition and set new goals a few days before I turned 22. These goals will expire when I turn 26 – I have already achieved a few and am deep in the process of attaining the others. Will I make it? Yes I will!

TEMPLATE

If you’re having difficulties making goals, use the SMART guide above and break your goals down in to 7 Key areas

  1. Relationships (Intimate, family, friends etc)
  2. Investment (Buying a house, shares, business plan?)
  3. Career (Where do you want to be in 5 years? Get your foot in the field, attain relevant qualifications)
  4. Personal Development & mentality
  5. Health/Appearance
  6. Spirit, Character, Core (What do you stand for? Who are you? What are your beliefs?)
  7. Miscellaneous (Something you’ve always dreamed of)

I hope this has helped! I would love to hear your thoughts and goal attaining methods. Comment below or get in touch via my various platforms.

LinkedIn Ashanta Charm

Twitter  @AshantaLC

Instagram  @Ashanta_

5 Year Plan – Have you done yours?