Renting a property by the room can create different mortgage, licensing and management considerations from a standard buy-to-let. If you are buying an HMO, converting an existing property or remortgaging one you already own, the lender will want to understand both the property and how you plan to let it.
Your expected rent, deposit, landlord experience and the HMO setup can all affect which mortgage options are available.
What is an HMO mortgage?
HMO stands for house in multiple occupation. It usually means a property rented by people from different households who share facilities such as a kitchen or bathroom.
Landlords use an HMO mortgage to buy or remortgage a property let in this way. A standard buy-to-let mortgage may not suit this setup, so specialist HMO mortgage criteria can apply.
The lender may assess the expected rent, bedrooms and tenant setup. It can also check the licence position, property standards and your landlord experience.
Before applying for an HMO mortgage
RENTAL
Check the rent supports borrowing
The lender may assess the total rent or room-by-room income against the mortgage.
LICENSING
Confirm the licence position
Check whether the property needs an HMO licence and whether the lender accepts its current setup.
PROPERTY
Check the HMO setup fits
Bedrooms, shared facilities, condition and intended use can all affect lender criteria.
APPLICATION
Expect specialist lender checks
Your deposit, landlord experience and ownership route can change which lenders and products fit.
HMO vs standard buy-to-let
An HMO is still a buy-to-let property, but the way tenants rent it can change the mortgage, licensing and management involved.
Area
Standard buy-to-let
HMO buy-to-let
Tenants
Usually one household
People from different households
Rent
Usually one rent
Often charged room by room
Mortgage
Wider lender choice
More specialist criteria
Management
Usually simpler
Usually more hands-on
HMO mortgage criteria and requirements
HMO mortgage criteria vary between lenders, but most applications come back to a few core checks. How lenders assess landlords can also depend on the property, experience, deposit and wider circumstances.
Rental income
The lender may assess total rent, room-by-room rent and whether the income supports the mortgage.
Deposit and loan-to-value
Your deposit sets the loan-to-value. A lower LTV can widen the rates and lenders available.
HMO property
Bedrooms, shared facilities, condition and intended use can affect whether the property fits.
HMO licence
The lender may check the licence position. It can also check that the property meets the required standards.
Landlord experience
Some lenders want previous buy-to-let or HMO experience. Your ownership route can also change the underwriting.
Deposit and borrowing
There is no single HMO mortgage deposit for every lender. Your deposit, property, expected rent and experience can all affect the amount available.
HMO lenders often place strong emphasis on rental income. They may test the total rent, room-by-room income or a valuer’s market-rent figure against the mortgage.
Do the HMO numbers work?
Estimate the borrowing, rent and potential rental yield before you commit.
HMO mortgage rates and lenders
HMO mortgage rates vary by lender and case. The interest rate can change with the loan-to-value, property size, licence position and your experience.
Not every buy-to-let lender accepts HMOs. The products HMO lenders offer can also differ on fees, rental calculations and property rules, so the lowest headline rate is not always the strongest HMO mortgage deal.
Some lenders offer interest-only HMO mortgages as well as repayment options. With interest-only, your payments cover the interest but do not reduce the original balance. You need a plan to repay it at the end of the term.
First-time landlords and limited companies
FIRST HMO
Some lenders accept first-time landlords
Others prefer previous experience. If this would be your first rental property, first-time landlord mortgage options can also vary with the property, rent, deposit and your circumstances.
LIMITED COMPANY
A company can own the HMO
The lender can assess the company and property. It may also check the directors, shareholders and rental income. Compare the wider position before buying personally or through a limited company.
Licensing and planning checks
Mortgage approval is only part of the picture. You also need to check whether the property can operate as an HMO.
Large HMO properties can fall within mandatory HMO licensing. Some councils also license smaller HMOs, so check the local rules before you commit.
Article 4 directions apply in some areas. They can restrict a change from a standard residential property to a small HMO, so local planning rules may mean you need planning permission.
Room sizes, shared facilities and fire safety can also matter. The lender may consider these alongside the property’s general condition.
Is an HMO right for you?
An HMO can offer higher rental income and rental yield than a standard single let. It can also bring more costs, checks and management.
WORTH KNOWING
Higher gross rent does not guarantee a stronger return. Test the mortgage, running costs and empty-room risk separately.
How Muttuo Mortgages can help
An HMO mortgage broker can help compare specialist lender criteria before you buy or remortgage.
Review the expected HMO rent, deposit and loan-to-value
Compare HMO mortgage options from more than 100 lenders
Check how the property, licence position and your experience may affect lender choice
Speak to an HMO mortgage broker
Compare HMO mortgage options for a purchase, remortgage or limited company application.
Your property may be repossessed if you do not keep up with your mortgage repayments.
The Financial Conduct Authority does not regulate some buy-to-let mortgages.
HMO mortgage questions answered
How much deposit do I need for an HMO mortgage?
There is no single amount. The lender will consider the property, rent, loan-to-value and your experience.
Can a first-time landlord get an HMO mortgage?
It may be possible. Some lenders accept first-time landlords, while others prefer previous buy-to-let or HMO experience.
Can I buy an HMO through a limited company?
Yes, some lenders offer limited company HMO mortgages. They can assess the company, property, directors and rental income.
Can I remortgage an existing HMO?
It may be possible. You could remortgage to review the rate, move lender or release equity. The new lender will check the property and current HMO setup.
Do HMOs need a licence?
Many HMOs need a licence, but the rules depend on the property and local council, so check the licensing position before you commit.
