HMO or B&B?

Updated HMOs information here

THE QUESTION

I got an HMO which meets full HMO regulations. I'm thinking of making it into a B&B which will certainly generate more income.

I'm going to remortgage ASAP. How do I prove the income as a B&B? Do I need to wait for one year?

THE ANSWER

If you are looking to remortgage, commercial lenders will view an HMO and a B&B completely differently.

With an HMO you have ASTs or licences, this gives the lender comfort of a continuity of income with which to service the mortgage.

With short-term letting (B&B, hotel) you could be full one week, empty the next, so no continuity of income for a lender to assess your ability to service the mortgage.

This means historical occupancy rates are critical to a lender to analyse your ability to service the mortgage. As an absolute minimum, the lender will want several months proof of occupancy percentages, but more than likely will want at least one year plus.

Lenders also prefer relevant business experience when granting a commercial mortgage. The cock-up ratio of someone running any business with no previous experience of it increases massively; making lenders much more wary of granting a mortgage.

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