HMO Mortgages for First-Time Landlords (2023)

Written by

Michelle B

Updated

21 Mar, 2024
Fact checked
FTL HMO Mortgages

What is a First-Time Landlord HMO Mortgage?

A First Time Landlord HMO Mortgage is designed for new investors purchasing a House in Multiple Occupation, a property rented by multiple tenants sharing common areas. These mortgages typically require larger deposits, often 25-30% of the property’s value, and may have higher interest rates due to the perceived increased risk. They are popular for their potential to yield higher rental income compared to single-tenancy properties.

Highlights of HMO Remortgages

Rates from 3% APR

Up to 85% LTV

Loans with no minimum income requirements
Loans with zero product/lender fees upfront
Loans from £50,000 to £10 million
Interest-only or repayment options

Eligibility Criteria for First-Time Landlords

  1. Personal Credit History: Lenders will typically look at your credit history to assess your financial reliability. A good credit score can increase your chances of being approved.

  2. Income and Employment: Stable income and employment history are important. Some lenders might require you to have a certain minimum income, although this income does not necessarily have to come from being a landlord.

  3. Deposit: HMO mortgages often require a larger deposit compared to standard residential mortgages. This could be around 25% to 30% of the property’s value, but the exact percentage can vary.

  4. Experience: While some lenders accept first-time landlords, others might require experience in property management. However, given that you’re specifically looking at first-time landlord mortgages, there are options available that don’t require previous experience.

  5. Property Type and Location: The type of property and its location can also influence eligibility. Lenders may have specific criteria for what constitutes an acceptable HMO property.

  6. Rental Income Potential: The projected rental income from the property is a crucial factor. Lenders typically want to see that the rental income will comfortably cover mortgage payments, often up to 125-130% of the mortgage payment.

  7. Age Limits: There are usually minimum and maximum age limits for applicants, which can vary between lenders.

  8. HMO Licensing: Depending on the local regulations, your HMO property may need to be licensed. Lenders will often require proof that the property either has a license or is eligible for one.

  9. Legal and Safety Requirements: Compliance with legal and safety standards for HMOs is critical. This includes fire safety regulations, minimum room sizes, and facilities for tenants.

  10. Insurance: Having suitable landlord insurance in place is often a requirement.

First Time Landlord HMO Mortgages Rates

Limited Liability Partnership (LLP) HMO Mortgages are essential financial tools for LLPs investing in Houses in Multiple Occupation, offering tailored solutions to suit the unique structure and requirements of these partnerships. These mortgage rates and terms are shaped by factors such as the LLP’s financial health, the property’s condition, and the specific lender’s policies.

We’re working on this data as we speak.

The data displayed is for display purposes only & not accurate. 
For live rate information, get a free quote

LTV

85%

Monthly
£621
APR
2.09%
APRC
3.09%
Fees

£10,000

LTV

85%

Monthly
£621
APR
2.09%
APRC
3.09%
Fees

£10,000

LTV

85%

Monthly
£621
APR
2.09%
APRC
3.09%
Fees

£10,000

LTV

85%

Monthly
£621
APR
2.09%
APRC
3.09%
Fees

£10,000

LTV

85%

Monthly
£621
APR
2.09%
APRC
3.09%
Fees

£10,000

See all the FTL HMO Mortgage products available

Check all HMO mortgages products by Max LTV

HMO Mortgage Application Process for First Time Landlords

Embarking on the journey as a first-time landlord in the HMO market involves a series of important steps in the mortgage application process. Understanding these steps is essential for successfully securing financing for your first HMO property.
01 Define Objective
Begin by defining your objectives for investing in an HMO property. Consider what you aim to achieve, like rental income potential, property location, and long-term investment goals. Your objectives will shape your decision on the most appropriate HMO mortgage product for your needs.

0-4 weeks

Engage in thorough research to compare HMO Mortgage products suitable for first-time landlords. Focus on factors such as interest rates, loan-to-value ratios, and specific terms that cater to first-time investors in the HMO market. Seeking advice from a mortgage advisor experienced in HMO properties can be incredibly beneficial in aligning your goals with the right mortgage product.

0-4 weeks

Obtain a Decision in Principle (DIP) from a lender. This preliminary financial review is a crucial step in assessing your borrowing power and demonstrates your seriousness as a buyer in the competitive HMO property market.

0-4 weeks

Prepare and organize all required documentation, including financial statements, proof of income, and personal identification. For HMO properties, you may also need to provide details about the property, such as location, size, and potential rental income. Accurate and comprehensive documentation is key to a smooth application process.

0-4 weeks

Submit the full mortgage application, detailing your financial status and plans for the HMO property. As a first-time landlord, it’s important to be thorough and clear in this step to facilitate a smooth evaluation process.

0-4 weeks

Cooperate with the valuation process, which is conducted by the lender to ascertain the property’s value and suitability as an HMO. This assessment is vital for determining the loan amount and ensures that the property is a sound investment.

0-4 weeks

After the mortgage approval, focus on completing the final steps, including legal procedures and financial settlements. Efficiently navigating this phase allows you to promptly take ownership of your HMO property and start your journey as a landlord.

0-4 weeks

FTL HMO Mortgage Fees

Understanding the fee structure associated with FTL HMO Mortgages is crucial for any prospective borrower.

Arrangement Fee
Charged by the lender for setting up the mortgage. This can be a significant amount, sometimes a percentage of the loan.
Cost: From free to £3,000
Pays for a professional appraisal of the property’s current value and its potential value after refurbishment.
Cost: From free to £3,000
Covers the cost of legal work associated with the mortgage, including conveyancing.
Cost: From free to £3,000
If you use a mortgage broker, they may charge for their services in finding and arranging the mortgage.
Cost: From free to £3,000
If you’re switching lenders, you might need to pay an exit fee to your current lender.
Cost: From free to £3,000
If you repay the mortgage early, you might be subject to these charges, especially if the mortgage has a fixed rate or discount period.
Cost: From free to £3,000
For more detailed structural surveys of the property, especially important for refurbishment projects.
Cost: From free to £3,000
If the loan requires additional security, there might be extra costs involved in valuing and securing this collateral.
Cost: From free to £3,000
Miscellaneous costs for processing and managing the mortgage application and agreement.
Cost: From free to £3,000
May apply if borrowing a high percentage of the property’s value.
Cost: From free to £3,000
If your refurbishment requires planning permission or must comply with building regulations, there may be associated fees.
Cost: From free to £3,000
You’ll need appropriate insurance during the refurbishment process, which may incur additional costs.
Cost: From free to £3,000

Looking for a free LLP HMO Mortgage quote?

View the best available deals, fast & free.

First Time Landlord HMO Lenders

There are several lenders suitable for LLP HMO mortgages.

34

No of HMO lenders

700

No of HMO products

£237,000

Average HMO loan

£25.3B

UK HMO Market Size

On average the HMO mortgage process takes from 4 to 6 weeks but can depend on a number of factors, like your personal situation, or the mortgage product you’re applying for. The illustration below gives an example of how a typical HMO mortgage process could go.

First-Time Landlord Mortgage FAQs

What is a First Time Landlord Mortgage?
A First Time Landlord Mortgage is a loan product specifically designed for individuals who are purchasing a rental property for the first time.
Answered by
Marisa G.
Updated 30 Nov
Eligibility typically includes individuals who have never owned a rental property before, possess a stable income, and have a good credit history.
Answered by
Marisa G.
Updated 30 Nov

When applying, you’ll need to provide proof of income, identification, a business plan for the property, and possibly evidence of savings or investment funds.

Answered by
Marisa G.
Updated 30 Nov
Yes, you can obtain this mortgage without prior property management experience, although some lenders might require additional assurances or higher interest rates.
Answered by
Marisa G.
Updated 30 Nov
The main differences are that First Time Landlord Mortgages are assessed based on potential rental income and might have different interest rates and eligibility criteria compared to standard residential mortgages.
Answered by
Marisa G.
Updated 30 Nov
Typically, the maximum LTV for such mortgages is around 75-80%, but this can vary depending on the lender.
Answered by
Marisa G.
Updated 30 Nov
Interest rates for these mortgages are often higher than standard residential mortgages, reflecting the increased risk associated with rental properties.
Answered by
Marisa G.
Updated 30 Nov
Common fees include arrangement fees, valuation fees, and legal costs, similar to other types of property mortgages.
Answered by
Marisa G.
Updated 30 Nov
The process usually takes a few weeks but can vary based on the lender and the complexity of your financial situation.
Answered by
Marisa G.
Updated 30 Nov
No, these mortgages are intended for rental properties only, and living in the property can violate the loan terms.
Answered by
Marisa G.
Updated 30 Nov

A larger deposit is often required, reflecting the higher perceived risk by lenders of renting out property.

Answered by
Marisa G.
Updated 30 Nov
The potential rental income is a key factor in assessing your application and determining how much you can borrow.
Answered by
Marisa G.
Updated 30 Nov
Yes, you can switch if you decide to rent out a property initially purchased with a residential mortgage, subject to meeting the lender’s criteria.
Answered by
Marisa G.
Updated 30 Nov
If you struggle to find tenants, you’re still responsible for meeting mortgage repayments, which can be challenging without rental income.
Answered by
Marisa G.
Updated 30 Nov
You’ll need landlord insurance, which is more comprehensive than standard home insurance, to cover property damage, liability, and potential loss of rent.
Answered by
Marisa G.
Updated 30 Nov
Lenders may assess your financial stability, income, and business plan for managing the property, even without prior experience.
Answered by
Marisa G.
Updated 30 Nov
Yes, most lenders will consider potential rental income from the property as part of your total income for mortgage qualification.
Answered by
Marisa G.
Updated 30 Nov
You can purchase various types of properties, including apartments and houses, as long as they are intended for rental purposes.
Answered by
Marisa G.
Updated 30 Nov
Yes, but you may need a specialized mortgage product, and the lender will assess the property’s potential post-renovation.
Answered by
Marisa G.
Updated 30 Nov
Many lenders offer guidance and resources for first-time landlords, including advice on legal obligations and property management.
Answered by
Marisa G.
Updated 30 Nov

First-Time Landlord HMO Mortgage News

Advertiser Disclosure

Please note that the mortgage rates and information displayed on our website are for informational purposes only and may not be accurate or up-to-date.

It is important to verify the rates with a licensed mortgage broker, lender, or financial institution before making any financial decisions. Rates can vary based on various factors including creditworthiness, loan amount, and market conditions.

We do not guarantee the accuracy or availability of the rates displayed on our website. We encourage you to consult with a qualified professional to obtain personalised mortgage advice tailored to your specific needs and circumstances.

Advertiser Disclosure

Please note that the mortgage rates and information displayed on our website are for informational purposes only and may not be accurate or up-to-date.

It is important to verify the rates with a licensed mortgage broker, lender, or financial institution before making any financial decisions. Rates can vary based on various factors including creditworthiness, loan amount, and market conditions.

We do not guarantee the accuracy or availability of the rates displayed on our website. We encourage you to consult with a qualified professional to obtain personalised mortgage advice tailored to your specific needs and circumstances.

Data & Privacy

FAQs

Do I need an HMO Mortgage?

If the answer is yes then go for it. If not, then reconsider the options. If the answer is yes then go for it. If not, then reconsider the options. If the answer is yes then go for it. If not, then reconsider the options.

If the answer is yes then go for it. If not, then reconsider the options. If the answer is yes then go for it. If not, then reconsider the options. If the answer is yes then go for it. If not, then reconsider the options.
If the answer is yes then go for it. If not, then reconsider the options. If the answer is yes then go for it. If not, then reconsider the options. If the answer is yes then go for it. If not, then reconsider the options.
If the answer is yes then go for it. If not, then reconsider the options. If the answer is yes then go for it. If not, then reconsider the options. If the answer is yes then go for it. If not, then reconsider the options.
If the answer is yes then go for it. If not, then reconsider the options. If the answer is yes then go for it. If not, then reconsider the options. If the answer is yes then go for it. If not, then reconsider the options.
If the answer is yes then go for it. If not, then reconsider the options. If the answer is yes then go for it. If not, then reconsider the options. If the answer is yes then go for it. If not, then reconsider the options.