Which type of valuation is up to the lender, typically Buy to Let lenders will use a standard valuation, and commercial lenders may in some circumstances use a commercial assessment.
Typically if the property looks like or is a converted residential property – it will be on a standard valuation. If it is an ex-care home or other purpose-built or substantially not residential – the lender can value it on commercial terms.
There are some disadvantages - commercial terms often come at low loan-to-value and often higher rates. They may require the mortgage on repayment terms and other commercial contract obligations. Such as having life insurance.
There are some advantages - the property as a commercial entity can be valued higher base dont the rental income generated by the business, rather than bricks and mortar valuation.
Most HMO Mortgage lenders base their valuation on bricks and mortar. Those that do offer it have varied conditions such as having C4 planning approved (not automatic C3 to C4 planning).
The valuation of House of Multiple Occupation (HMOs) can be undertaken under two methods:
Commercial HMO Valuations are rare in that most lenders do not offer this route, they take the view that Buildings Value gives them greater security based on vacant possession re-sale value.
Buildings HMO Valuations are more common. Its the valuation you would expect if this property was a normal single dwelling - its based on the property and local comparable.
The odd commercial lender can request from there Valuers to put a price tag on the property as an on-going business.
A Commercial HMO Valuation is therefore a multiple of income.
As a HMO is in reality a residential property (perhaps temporary) being used for commercial purpose. Therefore valuers are always mindful of the "worst case scenario" and are mindful of the Buildings Valuation.
Yes and No.
Ask for it from your HMO Mortgage Broker if you wish but this may limit your lending options.
It is commercial minded lenders that offer this type of Valuation which can reduce your market from the more high-street lenders that may offer you a mortgage on a better rate or terms that meet your other requirements.
The commercial route may mean higher costs being - the lender, the valuation and the conveyancing.
[alert type="warning" close="true" heading="Notice"]Commercial HMO Valuations are rare in that most lenders do not offer this route.[/alert]
No - this is criteria dependent.
Lets take a look at Aldermore (September 2016) for instance.
It comes down to Planning Consent.
C3 Dwelling that automatically gain planning consent to a C4 HMO - can only get a Buildings Valuation.
To be able to qualify for a Commercial HMO Valuation - the property requires formal planning consent.
(Not to be confused with a HMO Licence - different things!)
You require formal planning consent under two circumstances:
A property may not qualify for C4 planning permission, if it has 6 or more unrelated tenants. It will therefore qualify - you will need to apply for Sui Generis planning consent.
If a city has Article 4 direction in place, it may not offer automatic C3 to C4 planning permission. It will therefore qualify - you will need to apply for planning consent.
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When it comes to planning your normal house is a C3 Dwelling as standard.
In most cities you can change a C3 Dwelling into a C4 Dwelling without planning permission., a C4is a dwelling that has between 3 to 6 unrelated individuals. Unless the City has introduced special restrictions known as Article 4 direction.
If a city has introduced an Article 4 Direction then the automatic C3 Dwelling into a C4 Dwellingpermission is revoked and must be applied for.
If the property has six or more unrelated individuals it will require application for Sui Generisplanning use.
In addition to Planning Consent your HMO Property may require a HMO Licence, but that's another topic.
We have discussed Aldermore criteria but other commercial lenders may differer (or not offer it at all).
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