Buy to let mortgages

Buy to let properties

Buy to let mortgages are available on a variety of property types. The type of property will have an impact on the buy to let mortgage products and rates available. A summary of the different buy to let property types can be found below.

Vanilla buy to let – houses and flats

Properties in this category tend to be normal 2-3 bed houses and flats, usually fitting the general lending criteria of mainstream buy to let lenders. In the trade these property types are known as vanilla buy to let properties.

Terraced houses, especially of the Victorian and Edwardian era are the most popular, however semi-detached, detached houses and bungalows are also common.

Flats tend to be in purpose-built blocks or converted houses. Many lenders will not consider flats in high rise blocks, particularly where the block is owned by the council or a housing-association, so it always worth checking with us to see how many storeys a particular lender will consider. 

Houses in multiple occupation (HMOs)

HMO property is one where unrelated tenants have exclusive access to their rooms and share common living areas, such as the kitchen or bathroom. Examples include student shared housing or bedsit style housing. The property can either be let on a single Assured Shorthold Tenancy (AST) which includes all of the tenants, or alternatively each tenant can have their own AST agreement.

Legislation requires that some HMOs are licensed by local authority. The local authority will determine whether the property in question is classed as an HMO, based on the number of storeys and/or the number of people/households living within the property. The local authority will then advise if the property requires a licence to operate.

For licensing purposes a household refers to members of the same family, or couples (whether or not they are married), living together, whilst a group of friends sharing does not constitute a single household.

In addition, each local authority may require that a property has planning permission to operate as an HMO or to be let to three or more unrelated sharers, so it is vital to make checks that all the relevant permissions and licences are in place before applying for a buy to let mortgage. Most lenders will ask for documentary proof that the required permissions and licences have been confirmed.

Properties converted into self-contained flats could be considered HMOs if the conversion does not meet the 1991 Building Regulations and more than one third of the flats are let out on short term tenancies.

Void periods for part of a HMO has a lesser impact on a landlord’s cash flow than a void period on a standard buy to let property. 

Multi-unit freehold blocks (MUFBs)

A multi-unit freehold block is a single building with multiple, separate, independent residential units owned under a single freehold title, meaning no unit is subject to a lease. This particular property type comes in a variety of configurations, such as purpose built blocks or flats or houses converted into flats and have the following characteristics:

  • Multiple houses, each with their own AST agreement.
  • Private areas that are the personal space of each resident/household into which no one else has right of access.
  • Separate entrances for each resident/household.
  • Some also have common areas that all residents/households have the right to use, such as a hallway or garden area.

Much like HMO properties, multi-unit freehold blocks are favoured by professional investors as they provide a key cash flow advantage during void periods in relation to vanilla properties.

 

Multi-lets and Student-lets

Multi-lets and student-lets are similar to HMOs. They are often referred to as non-licensable HMOs because they have many characteristics of an HMO but the local authority deems that they do not require an HMO licence. However, they may require planning permission from the local authority so do check on both requirements.

Like HMOs, these properties may be let on one AST (including the names of all the tenants), or on individual ASTs. When considering the rental income required for these properties, lenders will either base their stress test on a single family unit on one AST or on the individual ASTs for each tenant, so do talk to us to find out which lenders have the best criteria for your circumstances.

 

Semi-Commercial properties

These are also knows as mixed investment and part commercial properties and consist of buildings made up both a residential and a commercial element such as:

  • Flats above shops or offices
  • Pubs and guesthouses with separate owner’s accommodation

From a funding perspective, lenders will often consider these properties as a commercial proposition and provide a commercial mortgage solution rather than buy to let finance. So if you are considering purchasing or refinancing semi-commercial property, do give us a call to talk through the options on 0845 345 6788.

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.