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Can I get a HMO mortgage?

HMO mortgage lenders will typically (but not always) want you to have pre-existing letting experience. Or, they may place a limit on the property size, defined by the number of bedrooms (e.g. up to 6 bedrooms).

Rent from the property must typically be between 125% and 145% of the monthly mortgage payment.

Factors that may impact you getting a HMO mortgage

  • Some types of poor credit
  • Not having enough money for a deposit
  • The value of the property being less than you expected

If you have questions, chat to our advisors on live chat, via the phone, or get a call-back we're here to help.

Today's HMO mortgage rates

You can use our HMO mortgage calculator to compare today’s latest HMO mortgage rates.

Eligibility for an HMO mortgage

  • First time buyers to experienced landlords
  • You must be over 18 years old
  • Minimum deposit 15% of the property value
  • Upper age limits at application are flexible
  • Low personal incomes are accepted
  • Property, pension and employment income is OK
  • Ready to get started?

    Request a call-back from our expert advisors

What is an HMO mortgage?

Buy to let mortgages for HMO properties (houses of multiple occupation) can be a highly profitable investment opportunity for landlords, because each bedroom is let out to a different tenant, so there are multiple rents.

This means this type of property commonly achieves a higher yield than standard buy to lets.

HMO mortgages tend to carry higher rates and fees than mortgages for standard buy to let property, due to them being deemed as higher risk by lenders.

The risk comes from HMOs often being subject to a higher turnover of tenants, potentially resulting in more rental voids than a standard buy to let. Damage to the property is also more common, because more people tend to live in an HMO. All of these factors increase the risk of investment for HMO mortgage lenders.

However, whilst there may be a relatively more frequent turnover of tenants, it is less likely that multiple tenants will leave at the same time. As a result, void periods can have less of a financial impact.

As a specialist HMO mortgage broker, our advisors have extensive experience in rental property finance, working with complex HMO cases and finding the best deal in the market for our clients.

You may be investing in a property that is a Multi-Unit Freehold Block, we can absolutely help.

By contrast, we can also help with HMO mortgages for first time landlords or first time buyers. Whilst the lending options are far fewer, we may still be able to help. Or, if you invest in joint names with someone with landlord experience, the options open up again to more HMO mortgage providers.

HMO mortgage deposits

Whilst some lenders will offer HMO mortgages that require a small deposit (15%-20%) compared to others (25% or more), you will typically find that they are fewer in number. As you increase the amount of deposit you put down, you usually find the number of lenders and products available to you increases and the mortgage interest rate decreases.

HMO mortgages with no minimum income

It’s possible to secure an HMO mortgage with no minimum income requirements. Buy to let mortgages in general are not reliant on the applicant’s personal income. The rent from the property covers the mortgage costs. This is the reason many lenders only need to see some sort of income, but not a particular amount, when offering a mortgage.

This is an important point though – it is generally necessary to have a modest alternate income source (whether from other property, some sort of employment or a pension) because there is always a risk of rental voids, where you are not receiving rent but still have the mortgage to pay.

HMO remortgages

An HMO remortgage is not a product, per-say, it is a process. The only big difference with HMO remortgaging over a buy to let mortgage is that it involves HMO properties.

Why consider a HMO remortgage?

If you do not remortgage when you reach the end of the initial rate period of your existing product, your monthly payments are calculated using your lender’s reversion rate.

This is always a variable rate, which puts you at risk of your monthly payments changing. You will generally find that a lender’s reversion rate is higher than other deals available in the market, so it makes sense to review your options.

Options available with a HMO remortgage

Remortgaging your HMO can help you:

  • Unlock capital, either by releasing equity as cash from a property already under mortgage, or by taking out a mortgage on a property you currently own outright, or ‘unencumbered’.
  • Reduce your monthly payments, if mortgage rates have gone down since your last mortgage
  • Protect yourself from further mortgage interest rate rises by fixing your rate, if rates are going up when you come to remortgage.

We work with a wide range of HMO mortgage lenders, including:

Why choose Commercial Trust?

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Apply with ease by phone

It couldn't be easier to secure a HMO mortgage with our expert advisors. Ask all your questions and arrange an application on the phone from your sofa.

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World class customer service

We'll find you a great deal and take all the admin work off your shoulders, so you can relax while we get your mortgage completed. All the while giving you progress updates.

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Lender decision in 2 hours

By contacting you by phone and email you can get help more quickly than in-person services. It's possible to get you a lender decision in principle in as little as two hours after our call.

We can help you with...

  • Houses of Multiple Occupation (HMO) with no maximum bedrooms
  • Multi-unit blocks with no maximum units
  • Borrow up to 85% loan to value (LTV)
  • No minimum income options
  • Lenders with no upper age limits
  • Flexible affordability calculations
  • 2, 3 and 5 year deal periods
  • Cashback, free valuation and other incentives available
  • Borrowing based on rental income from property
  • Unlimited portfolio sizes
  • Remortgage to like for like loan, or to raise capital
  • Special Purpose Vehicle (SPV) HMO mortgage accepted
  • Trading limited company HMO mortgage accepted
  • First time buyers accepted
  • Repayment or interest-only payment options
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"Get a competitive deal, even on specialist rental properties"

HMO mortgages do not always require a specialist mortgage rate, understanding the difference can save you a lot of money. Lee Cologne, HMO mortgage specialist.

Find out more
Lee Cologne

Costs involved with a HMO mortgage

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  • Lenders may charge you for the valuation conducted on your property. They often also charge a product fee, sometimes this can be added to the mortgage.

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  • You will need a conveyancing solicitor who will charge fees. Read our guide to choosing a conveyancing solicitor.

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  • We charge a broker fee for our work. You pay in two parts. A booking fee, once we have found you a mortgage deal, at application. The majority of our fee is paid at completion of the mortgage.

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  • Every mortgage comes with monthly mortgage costs based on the mortgage interest rate the lender charges. These are paid on either an interest-only or capital repayment basis.

How to apply for a HMO mortgage

1

Tell our advisors about the property you are investing in, your needs and circumstances. If you have credit concerns, chat to us about them, so we can put you with the right lender.

2

Your advisor will find the best possible deal from a search of thousands of products. They will get a lender decision in principle, this requires soft credit search (occasionally it is a hard credit search).

3

Your advisor will call to discuss the product they found for you. You will be presented with one mortgage that is the best match for all your needs and offers you the most cost effective option.

4

On your application, your advisor will submit your mortgage application. Your account manager then does all liaison and administrative work to complete the deal, whilst keeping you updated at every step.

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Frequently asked questions

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HMO stands for House of Multiple Occupation. It refers to a property rented out to at least three people, from more than one household, who share property facilities.

HMOs are sometimes referred to as a ‘house share’ where several individuals live in a single property.

Generally, they will have their own bedroom, but other parts of the property, such as living room, kitchen and/or bathrooms are shared facilities.

Each tenant will usually pay rent to the landlord, which can be cheaper than renting an entire property.

HMOs can also be used by students, recent graduates, those new to an area, contractors or professional people and more who are keen to live in affordable accommodation in expensive city-centre locations.

The council, local to your HMO property, will be able to tell if it needs to be licensed.

If your property is in England or Wales and is defined as a large HMO, you must obtain a licence from your local authority. A large HMO is defined by the following criteria:

  • The property is rented to five or more people who are from more than one household
  • Tenants share toilet, bathroom or kitchen facilities
  • One or more tenants pay rent

You might still need a licence even if your property isn’t classed as a large HMO. This varies across the UK, so you should check with your local council for a definitive answer. Failure to apply for a licence when one is required can carry significant penalties.

The UK government’s website offers a postcode-based search in order to identify which council issues licences for your property, and where you can access further information regarding HMOs and their licensing:

It is worth noting that:

  • You will need a separate licence for each HMO you run
  • Councils may have long timeframes (months) for processing a licence, so plan ahead

There are conditions associated with an HMO licence, including (but not limited to):

  • The property must have adequate space (each room needs to meet a minimum room size which varies based on how many rooms there are in the property, the local council can guide on the required sizes) and facilities for the residing tenants
  • The manager of the HMO (you or the agent) must be ‘fit and proper’ e.g. no criminal record or breaches of landlord laws or codes of practice.
  • Gas certificates must be updated annually and sent to the licensing council
  • Smoke alarms must be installed and maintained
  • Safety certificates for all electrical appliances must be available on request

If you fail to meet the conditions on a licence without a reasonable excuse, you are committing a criminal offence and could face significant penalties.

Yes, first-time buyers and first-time landlords can get an HMO mortgage.

An HMO mortgage is a specific type of buy to let mortgage. The mortgages vary in several ways.

As HMOs have multiple occupants, they are deemed a higher risk to loan money against than a traditional buy to let. This is because HMO tenants tend to have more transitional and/or seasonal (e.g. students) lifestyle.

This can mean higher levels of tenant turnover and longer void periods, should one or more of the tenants move out, without immediately being replaced. A single-family unit in a standard buy to let will tend to be more settled, with longer-term plan to reside in the property.

Secondly, due to the aforementioned risk with lending to an HMO and the specialist nature of the mortgage, the lender’s fees are often higher on HMO mortgage rates.

HMO and Multi-Unit Block properties are both owned (either outright or with a mortgage) by the landowner. They both offer accommodation to different tenant units.

The main difference is that multi-unit block has no shared living facilities. Each unit will have a front door, kitchen facilities, a bathroom and a living space (whether that is a separate lounge, dining and bedroom space, or a studio/bedsit, where one space combines lounge and kitchen facilities).

If a multi-unit block does not share utilities, the units could, hypothetically, be split into leasehold titles and sold separately. You could not, however, sell a bedroom in an HMO, under a separate title, as it would lack all of the facilities required.

We have access to MUB specific products, but some lenders combine their MUB and HMO offerings into one product.

The minimum deposit that our lenders accept on an HMO mortgage is 15% of the loan to value of the property.

The larger the deposit you are able to provide, the larger the range of products you will have access to.

To learn more about LTV and deposits, visit our LTV and deposit page or use our LTV calculator.

Lenders associate more risk with HMO products when compared to single self-contained units. As a result, HMO mortgage rates tend to be higher than standard buy to let mortgage products.

Another reason rates can be higher is that the lender market for HMOs is smaller and less competitive than the traditional buy to let market.

This means that whilst we have access to a range of HMO lenders; because HMOs are a specialist product, there are fewer lenders compared to traditional buy to lets, thus there is less incentive for lenders to lower their rates.