Large HMO Mortgages

Written by

Michelle B

Updated

21 Mar, 2024
Fact checked
Large HMO Mortgages

What is a large HMO mortgage?

A large HMO (House in Multiple Occupation) mortgage is a type of mortgage specifically designed for properties classified as large HMOs. These properties are typically defined by having a certain number of tenants or rental units. The specific definition can vary, but a common one is a property rented out to five or more people who form more than one household, sharing facilities like kitchens and bathrooms.

Highlights of Large 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

Criteria & Requirements for Large HMO Mortgages

  1. Applicant’s Credit History: A strong credit history is usually essential. Lenders will check your credit score and financial history to assess your creditworthiness.

  2. Experience in Property Management: Some lenders may require experience in managing HMOs or similar rental properties, particularly for large HMOs, due to their complex nature.

  3. Income and Employment Status: A stable income and solid employment history can be crucial. The lender might also consider the potential rental income from the HMO.

  4. Deposit Requirement: A larger deposit is often required for large HMO mortgages, potentially around 25-30% or more of the property’s value.

  5. Property Valuation and Type: The lender will assess the property’s value and its suitability as a large HMO. They might also consider its location, condition, and compliance with HMO regulations.

  6. Rental Income Potential: The projected rental income is a key factor. Lenders typically look for the rental income to cover the mortgage payments by a certain percentage, often around 125-130%.

  7. HMO Licensing: Large HMOs usually require a mandatory license from the local council. Proof of licensing or eligibility for licensing will be important.

  8. Building Regulations and Safety Standards: Compliance with safety and building standards, including fire safety, minimum room sizes, and facilities for tenants, is essential.

  9. Insurance: Appropriate landlord and HMO insurance is necessary to cover the specific risks associated with large HMO properties.

  10. Legal and Surveyor Fees: Expect to incur legal fees for conveyancing and surveyor fees for property inspection.

Large HMO Mortgage Rates

Mortgage rates for large HMOs are typically higher than those for standard residential properties, reflecting the increased risk and complexity associated with managing multi-tenant accommodations. These rates vary based on factors like the lender’s policies, the borrower’s creditworthiness, and the specific characteristics of the HMO property.

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The data displayed is for display purposes only & not accurate. 
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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 Large HMO Mortgage products available

Check all HMO mortgages products by Max LTV

Large HMO Mortgage Application Process

The application process for a Large HMO Mortgage, designed for properties housing a significant number of tenants, involves critical steps that are key to achieving successful loan approval. This guide is crucial for investors seeking to finance larger HMO properties.
01 Define Objective
Begin by clarifying your investment goals for the large HMO property. Consider factors such as expected rental yield, tenant demographics, and long-term financial objectives. Your investment strategy will influence your choice of the most appropriate large HMO mortgage product.

0-4 weeks

Research and compare various Large HMO Mortgage products available in the market. Pay special attention to details such as interest rates, loan-to-value ratios, and specific terms related to larger HMOs. Consulting with a mortgage advisor who specializes in large HMO properties can offer valuable insights and assist in finding a mortgage product that aligns with your investment goals.

0-4 weeks

Obtain a Decision in Principle (DIP) from a lender, which involves an initial review of your financial standing to determine your borrowing capacity for a large HMO. This step is essential as it shows your credibility as a borrower and is important for property negotiations.

0-4 weeks

Gather and organize all necessary documentation. This should include detailed financial records, proof of income, personal identification, and information about the large HMO property you are planning to invest in. Accurate and comprehensive documentation is vital for a smooth mortgage application process.

0-4 weeks

Proceed with the full mortgage application, providing detailed information about your financial circumstances and the specifics of the Large HMO property. Accuracy and transparency in this step are critical to avoid delays or rejection of your application.

0-4 weeks

Participate in the valuation process conducted by the lender, which assesses the property’s market value and suitability as a large HMO. This valuation is crucial in determining the loan amount and the viability of the investment.

0-4 weeks

Once the mortgage is approved, complete the final steps, including all legal and financial formalities. Efficient handling of this stage allows you to quickly take ownership of the large HMO property and begin managing it effectively.

0-4 weeks

Large HMO Mortgage Fees

Understanding the fee structure associated with Refurbishment HMO Mortgages is crucial for any prospective borrower.
Arrangement Fee
This is a fee charged by the lender for setting up the mortgage. It can be a significant amount, sometimes a flat fee or a percentage of the loan amount.
Cost: From free to £3,000
Covers the cost of a professional appraisal of the property’s value. This is crucial for HMOs to ensure they meet lending criteria and safety standards.
Cost: From free to £3,000
These cover the cost of legal work involved in the mortgage process, including conveyancing. Legal fees can be higher for HMOs due to their complex nature.
Cost: From free to £3,000
If you use a mortgage broker, especially one specializing in HMOs, they may charge a fee for their services in finding and arranging your mortgage.
Cost: From free to £3,000
For HMOs, a more detailed survey may be required to assess the property’s condition and compliance with HMO regulations, which can incur additional costs.
Cost: From free to £3,000
This fee might apply if you’re borrowing a high percentage of the property’s value.
Cost: From free to £3,000
If you’re leaving your current mortgage before it ends, you may have to pay an exit or early repayment charge to your existing lender.
Cost: From free to £3,000
These are miscellaneous costs involved in processing the mortgage application.
Cost: From free to £3,000
Adequate landlord insurance for HMOs might be more expensive due to the increased risks and requirements.
Cost: From free to £3,000
Managing a large HMO requires a license, which comes with its own set of costs.
Cost: From free to £3,000
If you repay the mortgage early, particularly during a fixed-rate period, you might face these charges.
Cost: From free to £3,000

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Large HMO Mortgage Lenders

Large HMO lenders specialize in providing mortgage solutions for Houses in Multiple Occupation that house five or more tenants from different households. These lenders offer expertise in managing the unique complexities and regulatory requirements associated with financing and investing in large HMO properties.

34

No of HMO lenders

700

No of HMO Products

£237,000

Average HMO Loan

£25.3B

UK HMO Market Szie

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.

Large HMO Mortgage FAQs

What is a Large HMO Mortgage?
A Large HMO Mortgage is a type of loan specifically tailored for financing properties classified as large Houses in Multiple Occupation, typically those with six or more tenants.
Answered by
Marisa G.
Updated 30 Nov
Eligibility for a Large HMO Mortgage often requires experience in managing HMOs or rental properties, a good credit history, and a stable income.
Answered by
Marisa G.
Updated 30 Nov
Applicants need to provide financial statements, proof of income, property details, HMO licenses, and a business plan for managing the property.
Answered by
Marisa G.
Updated 30 Nov
A Large HMO Mortgage caters specifically to properties with a higher number of tenants, often involving more complex management and higher loan amounts.
Answered by
Marisa G.
Updated 30 Nov
Interest rates for Large HMO Mortgages can be higher than standard residential mortgages due to the increased risk and management complexity associated with larger HMOs.
Answered by
Marisa G.
Updated 30 Nov
The typical LTV ratio for Large HMO Mortgages varies, but it is often lower than for smaller HMOs, usually around 65-75%.
Answered by
Marisa G.
Updated 30 Nov
Yes, there are specific legal requirements, including obtaining the necessary HMO licenses and complying with local council regulations for large HMOs.
Answered by
Marisa G.
Updated 30 Nov
Common fees include arrangement fees, valuation fees, legal costs, and potentially higher broker fees.
Answered by
Marisa G.
Updated 30 Nov
The process can take several weeks to months, depending on the lender and the complexity of the HMO property.
Answered by
Marisa G.
Updated 30 Nov
Yes, you can use a Large HMO Mortgage to finance the conversion of a standard property into a large HMO, subject to meeting planning and licensing requirements.
Answered by
Marisa G.
Updated 30 Nov
Typically, a larger deposit is required for a Large HMO Mortgage due to the increased risk and value of the property.
Answered by
Marisa G.
Updated 30 Nov
Rental income for Large HMO Mortgages is assessed based on the potential income from all individual lettable units in the property.
Answered by
Marisa G.
Updated 30 Nov
It’s challenging but possible, though lenders may require additional assurances or expertise in property management.
Answered by
Marisa G.
Updated 30 Nov
If management difficulties arise, you’re still responsible for the mortgage repayments, and it might be advisable to seek professional property management assistance.
Answered by
Marisa G.
Updated 30 Nov
You need comprehensive landlord insurance specific to HMOs, which covers public liability, property damage, and potential loss of rent.
Answered by
Marisa G.
Updated 30 Nov
Lenders evaluate your experience through your track record, previous rental income, and your business plan’s effectiveness for managing large HMOs.
Answered by
Marisa G.
Updated 30 Nov
Yes, refinancing an existing Large HMO is possible with this mortgage, depending on the property’s equity and income potential.
Answered by
Marisa G.
Updated 30 Nov
Challenges include stricter lending criteria, the need for substantial HMO management experience, and larger financial commitments.
Answered by
Marisa G.
Updated 30 Nov
A single Large HMO Mortgage is typically for one property, but you can have separate mortgages for HMOs in different locations.
Answered by
Marisa G.
Updated 30 Nov
Lenders often provide specialized advice on regulatory compliance, financial management, and best practices for operating large HMOs.
Answered by
Marisa G.
Updated 30 Nov

Large 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?

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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.