Student lets: what you need to know about mortgages and insurance
If you’re letting to students, the first thing to understand is that they’re considered higher risk than most other types of tenants. That means, whether you’re letting to one or five students, you must inform your lender and insurance provider and are likely to need a licence.
Although the number of products available to you will be more limited than for a ‘standard’ Buy to Let, you still shouldn’t have a problem getting something to suit. It’s just a matter of disclosing all relevant information and the best way to make sure you secure the most appropriate products is to work with brokers who are experienced in this more specialised area of the market.
Smaller student properties
If you have a single student studio apartment or a smaller flat, you should be able to take out a fairly standard Buy to Let mortgage. However, you must state on your application that you intend to let it to students.
Build to rent
The market for purpose-built student properties is growing incredibly quickly. This type of investment is generally sold and managed by specialist companies, who have their own teams of mortgage brokers they advise you to use. They may be offering you the best mortgage product but, because they’re likely to be tied to a just a few lenders, we’d still recommend you take independent advice from another broker like our partners at Embrace Financial Services. It’s always sensible to check to make sure you really are getting the most appropriate deal for your circumstances.
Houses in Multiple Occupation
If you let a larger property to several unrelated students, it will certainly be categorised as a House in Multiple Occupation (HMO). This is something you’ll need to apply to the council for a licence to operate and you must declare it on your mortgage application. All Houses in Multiple Occupation, regardless of the tenant type, are perceived to be a higher risk than other types of let and you’ll need to apply for a specialist mortgage.
Only around half of lenders offer Houses in Multiple Occupation mortgages and there are a number of extra pieces of information they’ll need and additional considerations. These include:
- The number of rooms in the property. Most HMO lenders will consider anything up to five bedrooms. Over that, you might need to look at commercial finance.
- The rental valuation. Even though letting to students can generate a healthy profit, some lenders still base their assessment on the rental income that would be generated by a ‘standard’ let, e.g. renting the property to a single family.
- The interest rate. Because there’s less competition in the HMO mortgage market, interest rates are generally higher than for standard buy-to-let mortgage products.
Because of the extra information you need to provide and additional hoops you’ve got to jump through, it’s advisable to use an experienced broker who’s familiar with the HMO mortgage market. Contact our partners, Embrace Financial Services, for a free initial consultation to go through everything you need to know.
The market for insuring student lets is still pretty niche. In the case of Houses in Multiple Occupation, where students have their own bedroom then share facilities, there’s a greater chance of them perhaps setting up a small kitchen area in their bedroom and there are likely to be more visitors to the property than normal. So, with these additional risk factors, the terms of the insurance policy are different to those for a single-let property.
Even if you’re letting a smaller property to just one or two students, you’ll still need to inform your insurer because they consider all students to be higher-risk tenants. Some insurers might make a small extra charge to cover you.
As with any Buy to Let insurance policy, the core cover with student property insurance is for the ’bricks & mortar’ of the building. Then there will be additional items of cover that come as ‘standard’, including:
- Malicious damage and theft
- Public liability, in case one of the students, their visitors or a contractor injures themselves in your property
Some of the following may also be included but, if they’re not, it’s worth considering taking out separate cover for:
- Accidental damage
- Contents (yours). Remember to tell students that they need to arrange their own contents insurance cover
- Alternative accommodation, in case your tenants need to be re-homed due to an insured peril.
- Rent guarantee insurance – there is no need to worry about unpaid rent
- Boiler repair or replacement if it’s a larger student let, as boilers tend to suffer much more wear and tear in Houses in Multiple Occupation
- Equipment breakdown for your white and other electrical goods
- Glass and locks replacement, in case of any break-ins.
At Your Move, we manage many student lets and are familiar with insuring this kind of investment. So, whether you only have one student property or need portfolio insurance, get touch today if you have any questions or would like a competitive quote from our experts, at https://www.your-move.co.uk/insurance/landlord-insurance .
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Embrace Financial Services usually charges a fee for mortgage advice. The amount of the fee will depend upon your circumstances and will be discussed and agreed with you at the earliest opportunity.