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HMO mortgages are a must-have for UK property investors aiming at rental income from multi-tenant homes. But finding the right lender can be tricky. Here's what you need to know:
- Rates vary by property type: Smaller, easily convertible HMOs often have lower rates. Larger or specialised properties are seen as riskier, so rates are higher.
- Specialist lenders dominate: Traditional banks are stepping back, while lenders like Metro Bank, Keystone Property Finance, and Kensington Mortgages offer tailored options.
- Key factors to compare: Look at interest rates, fees, maximum loan-to-value (LTV), and extras like free valuations.
- Broker expertise helps: Specialist brokers can match you with the best rates and navigate complex lender requirements.
Quick Comparison
| Lender | Term | Rate | Fee | Max LTV | Extras |
|---|---|---|---|---|---|
| Metro Bank | 2 years fixed | 3.59% | 5% | 75% | Low rate option |
| 5 years fixed | 4.69% | 5% | 75% | Stability focus | |
| 2 years fixed | 5.59% | £1,999 | 75% | Clear fee choice | |
| Keystone Property | 2 years fixed | 5.79% | 2.5% | 80% | Higher LTV |
| 5 years fixed | 5.99% | 2.5% | 80% | Consistent fees | |
| Kensington Mortgages | 5 years fixed | 4.59% | 5% | 75% | Free valuation |
Metro Bank offers the lowest rate at 3.59%, but fees can add up. Keystone is ideal for higher borrowing power, while Kensington includes perks like free valuations. For tailored advice, consult a specialist broker to align with your investment goals.
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What Affects HMO Mortgage Rates
When it comes to HMO mortgage rates, the specific features of the property play a major role. Lenders assess these details to determine the risks involved, especially regarding the property's potential for conversion and its overall size.
Property Characteristics
Lenders carefully analyse how easily an HMO property could be converted back into a standard residential home. For instance, a typical 4–6 bedroom house is often considered less risky because it can be converted with minimal effort. As a result, these properties tend to attract lower interest rates. On the flip side, larger or highly specialised HMOs, which might require significant modifications, are seen as riskier investments. This added risk often translates to higher mortgage rates.
This evaluation reflects lenders' overall approach to managing the risks associated with HMO properties.
Top Lenders for HMO Mortgages
Several specialist lenders now provide competitive HMO mortgage rates with a range of fee structures. These options reflect different approaches to property risk and lending criteria. Here's a closer look at what some of the top lenders are offering.
Metro Bank
Starting 4 September 2025, Metro Bank presents a 2-year fixed HMO mortgage at 3.59% with a 5% arrangement fee or 5.59% with a £1,999 fee. For a 5-year fixed term, rates are 4.69% (5% fee) or 5.49% (£1,999 fee).
Keystone Property Finance
As of 30 July 2025, Keystone Property Finance offers a 2-year fixed HMO mortgage at 5.79% with a 2.5% fee. Their 5-year fixed option is available at 5.99%, also with a 2.5% fee.
Kensington Mortgages: Fixed-Rate HMO Products
Updated on 4 September 2025, Kensington Mortgages provides 5-year fixed HMO rates at 75% LTV. Options include 4.59% with a 5% fee and free valuation, or 5.29% with a 3% arrangement fee.
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HMO Mortgage Rate Comparison Table
When you're exploring HMO mortgage options, having a clear view of what different lenders offer is essential. Rates, terms, and fees can vary widely, so a side-by-side comparison is a great way to pinpoint the best product for your investment goals.
Comparison Metrics
| Lender | Product Term | Interest Rate | Arrangement Fee | Maximum LTV | Key Features |
|---|---|---|---|---|---|
| Metro Bank | 2-year fixed | 3.59% | 5% | 75% | Low headline rate option |
| Metro Bank | 2-year fixed | 5.59% | £1,999 | 75% | Clear fee structure |
| Metro Bank | 5-year fixed | 4.69% | 5% | 75% | Longer-term stability |
| Metro Bank | 5-year fixed | 5.49% | £1,999 | 75% | Clear fee structure |
| Keystone Property Finance | 2-year fixed | 5.79% | 2.5% | 80% | Higher LTV available |
| Keystone Property Finance | 5-year fixed | 5.99% | 2.5% | 80% | Consistent fee structure |
| Kensington Mortgages | 5-year fixed | 4.59% | 5% | 75% | Free valuation included |
| Kensington Mortgages | 5-year fixed | 5.29% | 3% | 75% | Lower arrangement fee |
This table makes it easier to weigh up interest rates, fees, and loan-to-value (LTV) ratios to find the best fit for your financial plans.
Metro Bank offers a standout 2-year fixed rate at 3.59%, which is the lowest on the list. However, it comes with a 5% arrangement fee, which can add up quickly on larger loans. For those who prefer more predictable upfront costs, their £1,999 fee options provide a clear alternative, regardless of the loan amount.
Keystone Property Finance shines for investors who need higher borrowing power, offering an 80% LTV. Their 2.5% arrangement fee is consistent across both 2-year and 5-year terms, making cost planning straightforward. On a £300,000 loan, this fee would amount to £7,500, compared to £15,000 for a 5% fee.
For those looking to save on extras, Kensington Mortgages includes a free valuation, which can typically cost between £500 and £1,000 for HMO properties. This perk can help offset their slightly higher arrangement fees, especially for smaller loans.
When deciding on the best mortgage, it's important to consider both the interest rate and fees together. While 5-year fixed products often carry higher rates, they provide stability over the longer term, which can be invaluable for cash flow planning in HMO investments.
Given the complexity of these options, consulting a specialist HMO broker can help tailor advice to your specific needs.
Why Use a Specialist HMO Mortgage Broker
After comparing lenders, the next step is understanding how specialist brokers can refine your investment approach.
The HMO market can be tricky to navigate, but specialist brokers are skilled at connecting you with competitive mortgage rates tailored to your multi-let property needs.
Tailored Solutions for HMO Investors
Specialist brokers offer personalised solutions and tools designed to identify the most suitable HMO mortgage products for your investment. They understand the complexities of lender requirements and help simplify the process.
The HMO Mortgage Broker provides a platform that allows investors to compare over 5,000 HMO mortgage rates from specialist lenders. Among the tools they offer is an HMO calculator, which helps you estimate your borrowing capacity based on projected rental income. Additionally, Rental Income Stress Calculators are available to evaluate whether your expected rental yields align with lender affordability criteria.
These brokers often have access to exclusive HMO mortgage deals that aren’t available directly to borrowers. Their expertise ensures you’re matched with lenders who fit your financial situation and property type, potentially saving you a considerable amount over the lifespan of your mortgage.
Managing Portfolio Growth
Specialist brokers are invaluable when it comes to expanding your HMO portfolio.
Scaling a portfolio requires competitive rates and strategic planning. Brokers can assist with structuring deals across multiple properties, presenting your investment strategy in a way that addresses lender concerns and minimises potential risks.
Their expertise is especially helpful in complex cases, such as large HMOs with seven or more bedrooms, student housing, or properties needing substantial refurbishment. By working with HMO finance specialists, you can ensure your borrowing options are aligned with your long-term investment objectives.
Key Points on HMO Mortgage Rates
When planning your HMO mortgage strategy, it's essential to consider a mix of lender criteria, property specifics, and borrower details. Here's a closer look at the key factors that influence rates and costs:
Lender criteria play a big role in determining HMO rates. Factors like loan-to-value (LTV) ratios, licensing requirements, and your borrowing history all come into play. Each lender assesses risk differently, which is why LTV caps can vary significantly.
Property characteristics also impact the rates available to you. Things like the property's location, the number of bedrooms, and whether it meets local licensing standards will all influence the final rate calculations.
Your borrower profile is just as important. If you're a first-time HMO landlord, you might face higher rates or need to look for specialist products. On the other hand, experienced landlords with established portfolios often benefit from better pricing. Additionally, ensuring your property complies with regulations – such as holding a valid HMO licence and meeting fire safety standards – is non-negotiable.
Remember, the total cost of borrowing isn’t just about the interest rate. Lenders often charge arrangement fees, valuation costs, and legal expenses, which can vary widely. Sometimes, a lower interest rate can end up costing more when these additional charges are factored in.
Working with a specialist broker can help you navigate this complex market. Brokers have the expertise to compare products and find options tailored to your needs, saving you time and potentially money.
Finally, keep in mind that market timing plays a crucial role. HMO mortgage products are constantly changing due to shifts in lender appetite and regulations. Staying connected with a specialist broker ensures you’re ready to act quickly when a competitive rate aligns with your property type and investment goals.
FAQs
What are the benefits of using a specialist broker for an HMO mortgage?
Using a specialist broker for an HMO mortgage offers several advantages that can make the process smoother and more effective. For starters, they have access to a broad network of lenders. This means they can help you find competitive rates and deals specifically tailored to your needs, which might not always be available through mainstream options.
What sets specialist brokers apart is their deep understanding of the unique aspects of HMO properties. From navigating complex valuation processes to meeting specific lending criteria, their expertise can simplify what might otherwise feel like a daunting task. They can save you valuable time and help ensure that everything aligns with industry regulations.
On top of that, they offer personalised advice tailored to your individual circumstances. This guidance can help you make well-informed decisions, giving you the confidence to maximise the potential of your HMO investment.
How do the features of an HMO property affect the mortgage rates offered by lenders?
When it comes to HMO properties, features like size, tenant capacity, and adherence to licensing rules can play a big role in determining the mortgage rates lenders are willing to offer. Larger properties or those housing more tenants often come with varying rates, reflecting their rental income potential and the risks involved.
Properties that comply with local licensing laws and provide shared amenities tend to be seen more positively by lenders. This compliance signals lower risk, which can make mortgage rates more attractive. Together, these elements shape how competitive the rates for your HMO property might be.
What should I look for when comparing HMO mortgage rates and fees in the UK?
When you're exploring HMO mortgage options, it's crucial to weigh up a few key elements. Start with the interest rate – this could be tied to benchmarks like SONIA – and don't overlook additional expenses such as arrangement fees, valuation fees, and broker charges. These extra costs can add up and have a big impact on the total price of your mortgage.
Lenders will also take a close look at factors like your experience in lettings, your credit history, and the Loan to Value (LTV) ratio. These aspects often play a role in determining the rate you'll be offered. To get a clearer picture of the overall cost, consider the Annual Percentage Rate (APR), as it combines the interest rate with all associated fees. By carefully assessing these details, you'll be better equipped to find a mortgage that aligns with your financial plans.