Photo by Perfect Abode
This month, we’re tackling some common mortgage myths I’m frequently asked about—myths that simply aren’t true!
1. You need to own your own home or already have a BTL to get a BTL or HMO mortgage
While it certainly makes things easier, no, you don’t necessarily need to own a home or have an existing Buy-to-Let (BTL) property. There are options available that might be slightly more expensive, but it’s all about balance.
If you’re tight on deposit funds, you’ll need to weigh up the higher interest rate on your BTL or HMO mortgage against the money you’d spend on buying something you don’t really want. And then, of course, you’ll need to save for a deposit on the property you do want!
We have several lenders offering options (depending on the property you currently own and the one you’re buying), including one that will consider commercial valuations for smaller HMOs.
The first time you go down this route might not be the most streamlined or cost-effective, but this is often the case in any new venture. Many clients have used these options and then gone on to build large portfolios with more competitive rates in the future.
2. Limited company mortgages are always more expensive
To some extent, this is true—but not by much, especially once you own a few properties or become a full-time landlord with no non-property income.
What’s more important is your tax position and long-term goals. So, it’s always worth consulting with your accountant to get advice tailored to your situation. Once we know where you’re at, it’s our job to find the mortgage that best suits your needs.
Specialist lenders typically handle most HMOs or blocks of flats, as high-street lenders won’t consider them. They also don’t allow deposits from inter-company loans or director’s loans, so that’s another area where specialist lenders come into play.
On the flip side, specialist lenders often ask for less and are much more flexible in many areas. Plus, you’ll likely get your mortgage through much faster.
3. Bridging isn’t worth using
This is something I strongly disagree with! Yes, bridging adds additional expense to the deal, but if the numbers stack up, the advantages are significant. It allows you to make quick purchases, doesn’t require planning permission, and doesn’t need the property to be in mortgageable condition. Plus, it gives you the ability to realise a value uplift quickly.
That said, it needs to make financial sense. If you’re looking to refinance and pull money out to invest further, bridging could be a key part of your strategy. It opens up opportunities to buy properties that aren’t in mortgageable condition, which can be especially helpful if you’re planning a refurbishment.
Lenders are tightening the reins on using standard mortgages for property works, so it’s important to be upfront and do things the right way.
4. The lowest rate is always the ‘best option’
When considering your mortgage options, I always recommend thinking about where you want to be in five years and working backwards from there. Releasing equity, or doing it quickly, might be more important than simply chasing the lowest rate. Similarly, choosing a lender who’s flexible with your experience could be a better option.
There’s far more to it than just comparing rates. Quick comparisons can be misleading—make sure you understand the full picture before committing.
Also, lenders have specific rules around property types, so it’s important to find the right lender for your situation. For example, an HMO with no communal space or a property near commercial zones might require a lender that is more comfortable with those conditions.
5. Going direct to a lender can save me money
Why do you need a good broker in your team? Our role is to work with you to find the mortgage that best suits your needs. Most specialist lenders only work through brokers, so by going direct, you’ll miss out on several options.
We’re here to double-check your deals, ensure the Gross Development Value (GDV) works, verify your rental income, and make sure the mortgage terms align with your needs. We also guide you on valuation methodologies, which can vary significantly from lender to lender.
We work closely with the lender to smooth over any issues, challenge unreasonable requests, and help secure a quick offer. And we’re more than happy to liaise with legal teams to speed things up—especially since the legal side of things can be one of the trickiest parts of the process right now.
As always, if you need anything, feel free to reach out. You can book a call with me here.
About the Author:
Ellie Broadhurst is a specialist mortgage broker working at Baya Financial in partnership with The HMO Roadmap. She works with HMO property investors throughout their journey, from clients starting on their first project through to experienced portfolio landlords and developers. Learn more about Ellie here.