HMO Mortgages for Limited Company (Ltd Co) 2024

Written by

Michelle B

Updated

20 May, 2024
Fact checked
Limited Company HMO Mortgages
Ltd HMO Mortgages

What is a Limited Company HMO mortgage?

A limited company HMO mortgage is a type of loan specifically designed for a limited company to purchase or refinance Houses in Multiple Occupation (HMOs). HMOs are properties rented out to multiple tenants who share common facilities like kitchens and bathrooms but live in separate rooms.

This mortgage allows a company, rather than an individual, to hold the property, offering potential tax benefits and separating personal and investment finances. It’s commonly used by investors looking to expand or manage their property portfolios through a corporate structure.

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.

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

Highlights of HMO Limited Company Mortgages

  1. Tax Efficiency: Utilizing a limited company can lead to potential tax benefits, as companies are subject to corporate tax rates, which can be lower than personal income tax rates. This can result in increased net profits from rental income.
  2. Separate Legal Entity: A limited company functions as an independent legal entity. This separation between personal and business finances can protect personal assets in case of financial difficulties and simplify accounting and taxation.
  3. Limited Liability Protection: Shareholders of a limited company have limited liability, meaning their assets are generally protected. They are only liable for company debts up to the amount they’ve invested.
  4. Professional Image Enhancement:Operating as a limited company can project a more professional image, which can be beneficial in dealings with tenants, suppliers, and financial institutions.
  5. Access to Specialized Lending Options: Limited companies often have access to mortgage products specifically designed for corporate property investment, which might not be available to individual investors.
  6. Simplified Expansion of Property Portfolio:Owning properties under a limited company can make it easier to manage and expand a property portfolio, especially when dealing with multiple properties.
  7. Potential for Multiple Shareholders/Investors: A limited company structure allows for multiple shareholders, making it easier to raise capital by pooling resources from different investors.
  8. Easier Succession Planning and Asset Transfer: Transferring property ownership through a limited company can be more straightforward than personal ownership, simplifying the process of succession planning and asset transfer.

Implications of using a Ltd Co for buying an HMO Property

Capital Gains

When a limited company sells an HMO property, it may be subject to Capital Gains Tax. Unlike personal tax rates, which can vary based on individual circumstances and income levels, a company pays corporation tax on its profits, including capital gains. The rate of this tax is typically different and often lower than personal capital gains tax, but it’s important to consider that extracting profits from the company might incur additional taxes.

Stamp Duty

Buying an HMO property through a limited company usually incurs a higher rate of Stamp Duty Land Tax (SDLT) compared to individual purchases. This is due to the additional 3% surcharge applied to purchases of additional residential properties by limited companies. This surcharge can significantly increase upfront costs, making it an important factor in financial planning and budgeting for the purchase.

Mortgage Costs

Mortgage costs for limited companies are often slightly higher than for individual borrowers. Lenders perceive additional risks with lending to companies, particularly smaller or newly established ones. This can result in higher interest rates and possibly higher fees. However, it’s worth noting that the mortgage interest can be offset against rental income for tax purposes, which might not be fully possible for individual investors due to recent tax changes.

Personal Guarantees

Directors of limited companies are often required to provide personal guarantees when applying for an HMO mortgage. This means that in the event of the company defaulting on the mortgage, the directors may be personally liable for the debt. This requirement can expose the personal assets of the directors to risk, making it a significant consideration for the overall risk assessment of the investment.

HMO Licences

Obtaining an HMO license is essential for legally renting out an HMO property. These licenses ensure that the property meets certain standards and is managed properly. The requirements for obtaining an HMO license can vary significantly between different local authorities. They typically include minimum standards for room sizes, fire safety, and amenities. Failure to obtain an HMO license where required can result in hefty fines and potentially limit the company’s ability to legally rent out the property.

Ltd Co HMO Mortgage Criteria

Company Status: The company must be legally registered, typically as a Limited Company (Ltd) or Limited Liability Partnership (LLP), ensuring it’s recognized as a legitimate business entity for property investment.

Business Purpose: The company’s primary business activity should be related to property investment or management, indicating a focused and relevant business model for HMO mortgages.

Financial Health: Lenders will thoroughly assess the financial stability of the company, looking into its credit history, existing debts, and overall financial performance to gauge its ability to meet mortgage obligations.

Rental Coverage Ratio: The expected rental income from the HMO property must typically cover at least 125% to 145% of the mortgage repayments, ensuring that the property investment is viable and can sustainably support the mortgage.

Director’s Experience: Directors should have proven experience in managing or investing in property, as this experience is critical for successfully managing HMO properties and meeting lender’s confidence.

Personal Guarantees: Directors may be required to provide personal guarantees, linking their own financial credibility to the mortgage, which serves as additional security for lenders.

Property Type: The HMO property must meet specific quality and safety standards as set by the lender, ensuring that the investment is sound and the property is suitable for multiple occupants.

Deposit: A substantial deposit, typically ranging from 25% to 35%, is often required, reflecting the higher risk associated with HMO properties compared to standard residential properties.

HMO Licensing: The property should either already possess the necessary HMO licenses or demonstrate the potential to meet licensing requirements, ensuring legal compliance in its operation as an HMO.

Location: Some lenders may have specific geographical preferences or restrictions, offering HMO mortgages only in certain regions or localities, based on market conditions and their risk assessment strategies.

Ltd Co HMO mortgage rates

Limited Company HMO Mortgage interest rates are generally higher than standard residential rates, influenced by the company’s financial health and the property’s details. Shopping around for the best rates is crucial, as small differences can significantly impact long-term costs.
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)

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 Ltd Co HMO Mortgage products available

Check all HMO mortgages products by Max LTV

Ltd Co HMO Mortgage Process

The process of remortgaging an HMO is similar to the process of obtaining a traditional mortgage. You will need to submit an application, provide financial information, and have your property assessed. However, some lenders may have specific requirements for HMO mortgages, so it is important to be aware of these when applying.
01 Define Objective
Start by outlining your investment objectives for the HMO property within the context of your company’s overall strategy. This could include focusing on immediate rental yields, long-term capital growth, or a combination of both. Your investment goals will influence your choice of mortgage products.
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)

1 – 2 Days

Carefully compare various Limited Company HMO mortgage products. Look at factors like interest rates, loan-to-value ratios, and terms of repayment. Consider consulting a mortgage advisor who specializes in limited company investments to find the best options that align with your company’s objectives.
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)

1 Day

Obtain a Decision in Principle (DIP) from a lender. This involves a preliminary assessment of your company’s financial standing to determine potential borrowing capacity. While not a formal loan offer, a DIP is an essential step in assessing your eligibility and can be instrumental during property negotiations.
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)

2 Days

Gather all necessary documentation with precision. This includes your company’s financial statements, proof of income, identification documents, and specific details about the property. Accurate and complete documentation can streamline the application process.
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)

3 – 7 Days

Proceed with a detailed mortgage application. This requires disclosing your company’s financial health and plans for the HMO property comprehensively. Ensuring transparency and accuracy at this stage is crucial to avoid any delays or potential rejections.
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)

1 – 2 Weeks

Assist with the property valuation process, which is organized by the lender. This step verifies the property’s market value and is crucial in determining the mortgage amount. The property needs to meet expected standards for a successful valuation.
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)

1 – 2 Weeks

Complete the mortgage process upon approval. This final phase includes legal and financial formalities for the mortgage transfer. Efficient and attentive handling at this stage allows your company to quickly take ownership and start operating the HMO property.
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)

1 – 2 Weeks

Ltd Co HMO Mortgage Fees

In addition to rates, borrowers also need to consider HMO mortgage fees when shopping for a mortgage. These fees can include closing costs, origination fees, and other charges that are associated with obtaining a mortgage. Lenders may charge different fees for HMO mortgages, so it is important to compare the fees of different lenders to find the best deal. Some lenders may charge higher fees for HMO mortgages, while others may have lower or no fees at all.

Arrangement Fee
Charged by the lender for setting up the mortgage, often a percentage of the loan amount.
Cost: From free to £3,000
Covers the cost of valuing the property to determine its suitability for the mortgage.
Cost: From free to £3,000
Payable to solicitors for handling the legal aspects of the mortgage transaction.
Cost: From free to £3,000
If you use a mortgage broker, they may charge a fee for their services in finding and arranging the mortgage.
Cost: From free to £3,000
Sometimes charged at the time of application to reserve funds or a specific mortgage deal.
Cost: From free to £3,000
For a more detailed survey of the property than a basic valuation, if required.
Cost: From free to £3,000
Applicable if you pay off your mortgage early or switch lenders.
Cost: From free to £3,000
Payable to the local authority for obtaining an HMO license, if not already in place.
Cost: From free to £3,000
Similar to an arrangement fee, charged for accessing specific mortgage products.
Cost: From free to £3,000
Some lenders may charge this fee to cover their own legal costs.
Cost: From free to £3,000
Rare, but some lenders might charge this insurance if the loan-to-value ratio is high.
Cost: From free to £3,000
For processing any changes or additional requests during the mortgage term.
Cost: From free to £3,000

Looking for a free Ltd Co HMO Mortgage quote?

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Ltd Co HMO Mortgage Lenders

Navigating the landscape of Limited Company HMO Mortgage Lenders can be complex, as each lender offers unique terms, rates, and criteria tailored to corporate property investment. It’s essential for investors to thoroughly research and compare various lenders to find the best fit for their specific investment strategy and financial situation.

34

No of HMO lenders

700

No of HMO Products

£237,000

Average HMO Loan Size

£26.5B

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 for Limited Companies (Ltd Co)
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)

Ltd Co HMO Mortgage FAQs

What is a Limited Company HMO Mortgage?
A mortgage designed for limited companies to finance the purchase or refinance of Houses in Multiple Occupations (HMOs).
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
They are offered to corporate entities, not individuals, often with different rates, terms, and lending criteria.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Potential tax efficiencies, limited liability, and easier portfolio management.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Registered limited company status, financial stability, property type, and director experience.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Typically, yes, due to perceived higher risks by lenders.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Yes, but it may involve tax implications and legal processes.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Usually between 25% and 35% of the property’s value.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Yes, including obtaining proper HMO licenses and adhering to local authority regulations.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Companies pay corporate tax and can offset mortgage interest against rental income, differing from personal tax obligations.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
It’s challenging but possible with strong personal guarantees or higher deposits.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Often required, especially for smaller or newer companies.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Properties are rented out to multiple tenants who share facilities but live in separate rooms.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
The expected rental income must usually cover a specific percentage of mortgage payments.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Arrangement fees, valuation fees, legal fees, and possibly broker fees.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Typically, several weeks to a few months, depending on various factors.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Yes, but they might face stricter criteria and higher interest rates.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
The property could be repossessed, and personal guarantees might be invoked.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Yes, but additional criteria and conditions may apply.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov
Limits vary by lender, based on the company’s financial capacity and risk profile.
Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov

Assess financial stability, director experience, property type, and potential returns against mortgage costs and responsibilities.

Answered by
The HMO Mortgage Broker | HMO Mortgages for Limited Companies (Ltd Co)
Marisa G.
Updated 30 Nov

Ltd Co 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.