Remortgage of Large Student Let HMO with Headlease

The Client: An experienced landlord looking to remortgage one of his HMO student let properties.

The Property: A large HMO of 8 bedrooms, rented out to students in a Central London location.

The Finance: The mortgage was coming to the end of its initial term and the client wished to find a new 5-year term for the HMO property.

The Challenges: Firstly, the 8-bedroom HMO property had a ‘headlease’. A headlease is where there is a primary lease between landlord and tenant, under which subleases can be created. In this instance, the landlord had a headlease agreement with the university, who sub-let the rooms to students. The university was therefore the guarantor for the monthly rent, rather than the tenants - as you would traditionally find in a buy to let agreement. Headleases are usually found with commercial investments, so it was necessary to find a lender which would mortgage a residential buy to let property with one.

Secondly, we had to source a lender which would finance an HMO with more than 5 bedrooms, while trying to keep the client’s rate down. This meant we needed to find a specialist lender to meet all the criteria.

The Application Process: Even with whole of market access, finding a lender which would accept both the headlease and the size of the HMO property, on a buy to let mortgage, was going to be a challenge. After approaching a couple, we were able to run with an off-the-high-street lender which was happy to offer the finance. In addition to the usual documentation, which proved the clients’ healthy income, all they asked for was a copy of the headlease agreement in order to ensure of a clause protecting the right to repossess, should the client fall into arrears.

Once the lender was found everything moved very swiftly through to completion, much to the clients’ delight. Here are the details: