HMO Mortgages

Written by

Michelle B

Updated

1 Apr, 2024
Fact checked
HMO Mortgages

What is an HMO mortgage?

An HMO mortgage is a type of mortgage loan specifically designed for properties that are being used as a Licenced HMO. An HMO mortgage is a type of mortgage specifically designed for the purchase or refinancing of an HMO property.

HMO Definition; What is an HMO?

An HMO property is a property that is occupied by more than one household that shares facilities such as bathrooms and kitchens or other communal spaces.

Read more about HMO Licensing and HMO Planning Permission for complete information.

HMO Definition; What is an HMO?

An HMO property is a property that is occupied by more than one household that shares facilities such as bathrooms and kitchens or other communal spaces. Read more about HMO Licensing and HMO Planning Permission for complete information.

Types of HMO Mortgage

There are several different types of HMO mortgages available, each with its own specific features and terms. Some common types of HMO mortgages include:

1. HMO mortgages

This is the traditional HMO mortgage product specifically designed for the purchase of HMO properties. This can be for a normal C3/C4 HMO or a mortgage for an HMO that is Sui Generis (large HMO mortgage). This also includes HMO mortgages for first-time buyers and limited companies.

2. Student HMO mortgage

This mortgage is tailored for properties rented out to students. It’s designed for landlords who own Houses in Multiple Occupation (HMOs) that are specifically let to student tenants. These mortgages consider the unique rental patterns and demands associated with student rentals, often offering terms that accommodate the academic year and the higher turnover rates seen with student tenants. Read more >

3. Large HMO Mortgage

This is a mortgage product for larger HMO properties, often defined as those housing more than six tenants. Large HMOs typically fall under the ‘Sui Generis’ planning classification, meaning “of its own kind.” These properties require specific licensing and often face stricter lending criteria due to their size and complexity. Read more >

4. HMO Mortgage for Expats

Designed for expatriates who wish to invest in HMO properties in their home country while living abroad. These mortgages accommodate the unique financial and logistical challenges faced by expats, such as income earned in foreign currencies and the distance from the property. Read more >

5. HMO Mortgage for LLP

This mortgage is specifically for Limited Liability Partnerships that wish to invest in HMO properties. LLPs are a form of business partnership that offers some legal protections to its members. Lenders offering this type of mortgage understand the corporate structure and the need for flexible lending criteria that consider the partnership’s income and legal standing. Read more >

6. HMO Mortgage for Limited Companies (Ltd Co)

Similar to the LLP mortgage but designed for investment through a Limited Company. This type of mortgage considers the corporate entity as the borrower, with lending decisions based on the company’s financial health and the income generated by the HMO property. It’s a popular choice for investors looking to benefit from corporate tax efficiencies. Read more >

7. First Time Landlord HMO Mortgages

Aimed at individuals who are new to the property investment and letting industry. These mortgages provide support and financing options for those purchasing their first HMO property. Lenders may offer tailored advice and terms to help first-time landlords navigate the complexities of HMO management. Read more >

8. HMO Refurbishment Mortgages

This type of mortgage is specifically designed to finance the purchase and renovation of an HMO property. It allows investors to borrow money to both purchase the property and fund any necessary renovations or repairs. Read more >

9. HMO Mortgages with No Minimum Income Requirement

These mortgages are designed for investors who may not have a traditional or substantial income stream. Lenders evaluate the potential income from the HMO property itself rather than the personal income of the borrower, making it easier for investors to enter the market. Read more >

10. HMO Remortgages

This type of mortgage is specifically designed to finance the purchase and renovation of an HMO property. It allows investors to borrow money to both purchase the property and fund any necessary renovations or repairs. Read more >

11. HMO Bridging Finance

An HMO-specific short-term loan that is used to bridge the gap between the purchase of a property and the availability of long-term financing. Read more >

12. HMO Development Finance

This is a type of financing aimed at developers and investors looking to convert or build a property into an HMO. It provides the funds necessary for the development phase, covering costs from construction to conversion, with the aim of either selling the property for a profit or retaining it to generate rental income. Read more >

Highlights of HMO Mortgages

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

HMO vs BTL Mortgages

HMO mortgages and buy-to-let (BTL) mortgages are both types of mortgages designed for the purchase of rental properties, but there are some key differences between the two.

  • HMO mortgages are specifically for the financing of HMO properties. BTL mortgages can be used to purchase any type of residential rental property, including single-family dwellings, apartments, and houses.
  • HMO properties are considered to be higher-risk investments by lenders due to the higher potential for vacancy and the need for more frequent repairs and maintenance. As a result, HMO mortgages may have higher deposit requirements and stricter lending criteria compared to BTL mortgages. Read the full article here

Requirements & Criteria

HMO mortgages have different requirements and lending criteria compared to traditional mortgages due to the added risk involved in lending for an HMO property.

Common HMO mortgage requirements include:

  1. Higher deposit: HMO mortgages may require a deposit compared to traditional mortgages, as lenders want to ensure that the borrower has a financial stake in the property.
  2. Strong credit score: A strong credit score is typically required for an HMO mortgage, as it demonstrates the borrower’s ability to manage their finances and make timely payments.

  3. Proof of income: Lenders will typically require proof of the borrower’s income, including tax returns and payslips, to determine their ability to make mortgage payments.

  4. Property appraisal: An appraisal of the property is typically required as part of the mortgage application process, to determine the value of the property and ensure that it is sufficient to secure the mortgage.

  5. Property inspection: An inspection of the property may also be required to ensure that it meets the lender’s standards and is in good condition.

  6. Experienced HMO landlord: Some lenders may require the borrower to have experience as an HMO landlord to qualify for an HMO mortgage. This is because lenders want to ensure that the borrower has the knowledge and skills needed to successfully manage an HMO property.

HMO Mortgage Rates

Finding the best HMO mortgage rates can be a challenge. However, with the right guidance and advice, you can find the perfect mortgage for your HMO property. Here is a sample of live HMO mortgages.

The HMO Mortgage Broker | HMO Mortgages

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 HMO Mortgages products available

Check all HMO mortgage products by Max LTV

HMO Mortgage Application Process

HMO mortgage application processing times vary depending on several factors, including the lender, application complexity and the current demand for HMO mortgages. It’s common for the processing time for an HMO mortgage to be slightly longer than that of a traditional mortgage, due to the added risk involved in lending on an HMO property.

01 Define Objective

Begin by setting clear investment goals for your HMO property. Determine whether your focus is on immediate rental yield, long-term capital appreciation, or both. This decision will directly influence your mortgage selection strategy.

The HMO Mortgage Broker | HMO Mortgages

1 – 2 Days

Actively compare and contrast different HMO mortgage products. Evaluate interest rates, loan-to-value ratios, and repayment terms. Engage a specialist mortgage advisor for insights into the best options that align with your investment goals.

The HMO Mortgage Broker | HMO Mortgages

1 Day

Secure a Decision in Principle (DIP) from a lender. This step involves a preliminary financial assessment to estimate your borrowing capacity. While not a loan guarantee, a DIP is a critical indicator of your mortgage eligibility and is a useful tool for property negotiations.

The HMO Mortgage Broker | HMO Mortgages

2 Days

Compile all necessary documents meticulously. This package should include financial statements, proof of income, identification, and property details. Accuracy in documentation expedites the mortgage process.

The HMO Mortgage Broker | HMO Mortgages

3 – 7 Days

Submit a detailed mortgage application. This crucial step requires a comprehensive disclosure of your financial status and plans for the HMO. Ensure complete transparency and accuracy in your application to avoid delays or rejections.

The HMO Mortgage Broker | HMO Mortgages

1 – 2 Weeks

Facilitate the property valuation process arranged by the lender. This assessment confirms the property’s worth and determines the loan amount. It’s important to ensure the property meets the expected standards to pass this evaluation successfully.

The HMO Mortgage Broker | HMO Mortgages

1 – 2 Weeks

Finalise the mortgage agreement once approved. This stage involves the legal and financial transfer processes. Prompt and thorough action here will enable you to quickly assume ownership and begin managing your HMO property.HMO mortgage application processing times vary depending on several factors, including the lender, application complexity and the current demand for HMO mortgages. It’s common for the processing time for an HMO mortgage to be slightly longer than that of a traditional mortgage, due to the added risk involved in lending on an HMO property.

The HMO Mortgage Broker | HMO Mortgages

1 – 2 Weeks

HMO Mortgage Fees

It can depend on a number of factors, like your personal situation, or the mortgage product you’re applying for.

The table below will give you an idea of what to expect. The interest rate is just one component of the cost of HMO bridging: loans also come with fees, which need to be clearly understood. Wondering how much mortgage fees will cost?

It can depend on a number of factors, like your personal situation, or the mortgage product you’re applying for. The table below will give you an idea of what to expect.

Arrangement Fee

Charged by the lender for setting up the mortgage.

Cost: From free to £3,000

For property valuation to assess worth and rental potential.

Cost: From free to £3,000

Paid to solicitors for handling legal aspects of the mortgage.

Cost: From free to £3,000

Charged by mortgage brokers for finding the mortgage.

Cost: From free to £3,000

To secure a particular mortgage deal.

Cost: From free to £3,000

For borrowing a high percentage of the property’s value.

Cost: From free to £3,000

If you pay off the mortgage early or overpay beyond the limit.

Cost: From free to £3,000

For closing your mortgage account.

Cost: From free to £3,000

For detailed property surveys.

Cost: From free to £3,000

Similar to the arrangement fee, for the mortgage product offered.

Cost: From free to £3,000

Charged for applying for a mortgage.

Cost: From free to £3,000

For setting up, maintaining, and closing the mortgage account.

Cost: From free to £3,000

For transferring funds from the lender to the solicitor.

Cost: From free to £3,000

If a mortgage payment is missed.

Cost: From free to £3,000

Charged when a payment is late.

Cost: From free to £3,000

If exceeding the overpayment limit.

Cost: From free to £3,000

Looking for a free HMO Mortgage quote?

View the best available deals, fast & free.

HMO Mortgage Lenders

HMO mortgage lenders in the UK offer to finance individuals who want to purchase a property specifically to rent it out to multiple tenants.  HMO properties are typically larger than traditional residential properties and are often divided into individual rooms or units that are rented out separately.

34

No of HMO lenders

700

No of HMO Products

£237,000

Average HMO Loan Size

£26.5 B

Size of UK HMO Market

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.
The HMO Mortgage Broker | HMO Mortgages
The HMO Mortgage Broker | HMO Mortgages
The HMO Mortgage Broker | HMO Mortgages
The HMO Mortgage Broker | HMO Mortgages

HMO Mortgage FAQs

What is an HMO Mortgage?

An HMO mortgage is a loan secured against a property deemed to be a House in Multiple Occupation. This type of mortgage is used to purchase or refinance a property that will be used as a house of multiple occupancy.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

Yes, if you own or are looking to buy a property that is rented out to a group of people who share amenities but do not form a single household, you will need an HMO mortgage.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

Operating an HMO on a regular mortgage can breach the lender’s terms & conditions. The lender might recall the loan, putting you in a difficult position.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

The time to get an agreement in principle for an HMO mortgage can be as little as 2 hours, depending on the lender and your circumstances.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

Typically, the process from application to completion takes about 4 to 6 weeks, but this can vary based on the lender and specific circumstances.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

There are usually no upfront fees charged by brokers for HMO mortgages, but you may encounter valuation and legal costs payable to the lender before completion.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

Yes, many HMO lenders offer specific products for Limited Companies or Limited Liability Partnerships.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

Yes, obtaining an HMO mortgage is now a common process and can be just as straightforward as obtaining a standard buy-to-let mortgage.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

HMO mortgage rates are generally a bit higher than standard buy-to-let mortgage rates but are still competitive.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

Yes, it’s possible to get an HMO mortgage with adverse credit, though it might be slightly more challenging. There are specialist lenders who deal specifically with such cases.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

Yes, there are options for overseas applicants, though additional criteria may apply.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

Being a homeowner can provide more options, but it’s not strictly necessary. First-time buyers can also apply, though they might face stricter criteria and potentially higher interest rates or restricted LTVs.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

HMO mortgages have been placed for properties ranging from 3 bedrooms up to 300 bedrooms.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

The rental income for HMOs is evaluated based on the total potential income from all rented rooms or units. Lenders might also consider historical rental data, and local rental market conditions, and apply a vacancy allowance to account for unoccupied periods​​​.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

The process involves researching lenders, understanding HMO regulations, consulting with a mortgage broker, preparing financial documents, completing an application, and going through underwriting and approval​​.

Answered by
The HMO Mortgage Broker | HMO Mortgages
Marisa G.
Updated 30 Nov

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.

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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.