HMO Mortgage
If your buy to let has multiple tenants from different households you may require an HMO mortgage. If you don’t have one, there could be serious consequences.
What are HMO mortgages and do I need one?
A HMO (House in Multiple Occupation) is any property that has multiple tenants from different households. For example, one house split into separate rooms or flats. If this is you, you may need a HMO Mortgage. See the Government website for the full definition: https://www.gov.uk/house-in-multiple-occupation-licence
Contact Us to discuss a mortgage for HMO.
If you are looking for a standard buy to let mortgage, please see: Buy to Let
Topics Covered Below
Looking for Something Else
Talk To An Expert Now
We offer a free initial consultation to assess your circumstances and confirm your options
In what circumstances
do I need an HMO mortgage?
You will require an HMO mortgage if you’re considering purchasing an HMO property. If you have a buy to let (BTL) mortgage, the terms will not allow for you to let the property as an HMO.
It’s important to note that lender criteria for accepting an HMO mortgage will differ. Some will only offer mortgages on HMO properties with a maximum number of bedrooms. Others will only consider licensed HMO properties or those intended for private tenants.
Most lenders will consider an application for a property that has up to five bedrooms. If you are planning to purchase a large property, it’s likely that you’ll require commercial finance.
Contact Us to assess which HMO mortgage is best for you.
Read about commercial mortgages here: Commercial mortgages
Search The Site
What Our Customers Say
Things you should know about a HMO mortgage
There are three different types of HMO mortgage and which one you need depends on the property:
- Mortgages and remortgages – for existing HMO properties
- HMO refurbishment mortgages – for properties that require renovation.
- HMO development loans – if you are building a property from scratch.
- Not all lenders offer all three mortgage types. Mortgage brokers will be able to advise you which lenders offer which type.
Whether you apply for your mortgage as an individual, a limited company, or an LLC will affect the amount and type of tax you are liable for on your rental income.
Why Choose Us
Market Wide Advice
An unlimited comprehensive range of mortgages from lenders across the market including many exclusive deals
Flexible Appointments
Flexible appointments including evenings and weekends to suit your busy schedule because we understand you are busy
No Obligation Advice
Free initial consultation to assess your needs and provide helpful initial advice so you are fully informed to make decisions
Stress Free Process
Our professional and friendly team will help manage every aspect of the mortgage process through to completion
Free Lifetime Reviews
Free periodic reviews to make sure everything is working as it should be and that you remain on the best deal
Protecting your needs
Personalised advice on life and home insurance to ensure that your home and family are protected if things go wrong
Who is able to obtain an HMO Mortgage?
Mortgages for HMO have seen a rise in popularity in recent years, however, are still difficult to obtain. Usually mortgage providers will prefer an applicant to be an experienced landlord. Often they will prefer one to three years background experience. As a first time landlord you may be accepted, although this could be at the cost of higher interest rates.
A landlord will not usually be offered an HMO mortgage directly from the lender. Lenders usually prefer to use a qualified mortgage broker with specialist HMO knowledge as an intermediary. They also sometimes require that the rental of the HMO property is managed by a letting agent, rather than the individual landlord.
It’s worth considering that lenders will require additional information from the applicant than for other mortgage types. Of course, affordability checks and credit checks and evidence of your income will be required. Additional information requirements can include any or all of the below:
- Evidence of prior landlord experience
- Whether you will be taking out the mortgage as an individual or LLC
- The location of the HMO property and how many rooms you will be letting
- Whether AST agreements are in place for each room
- What type of tenants you will accept (i.e private or local authority)
- Who will be managing the letting of the property
- An HMO licence from the local authority (if required)
- Evidence of or estimate of the total rental income expected
Contact Us to check your eligibility.
How it Works
3 Easy Steps to a Simple Fast Mortgage
How are HMO mortgages
different to a standard BTL mortgage?
Lenders will often see HMO rental properties as high-risk investments. Therefore, interest rates and fees tend to be higher than on a standard buy to let mortgage.
The potential rental yield will be considered when calculating the maximum loan you can borrow. Similarly to a BTL mortgage application.
Deposit
The deposit required will depend on the LTV (loan to value amount) desired by each specific lender. Most lenders will require between 60-75% LTV, therefore at least 25% deposit.
HMO mortgage rates and fees
Due to the niche nature of HMO mortgages, there’s very little competition in the market. This means HMO mortgage rates are generally higher. HMO mortgage lenders are also likely to charge higher arrangement fees.
Terms
Much like a standard mortgage, a mortgage for HMO can be taken on either fixed or variable terms. They can also be repayment or interest-only. Given the higher rates associated with an HMO mortgage, it’s wise to consider your options before deciding on a fixed rate term.
Contact Us to find out what type of HMO mortgage is available to you.
What is a HMO licence and how is it obtained?
In some circumstances, you’ll require a license from the local authority to let out a multiple occupation HMO property. This usually applies to larger properties; specifically those which meet the following criteria:
- More than five residents (unless they’re from the same family)
- Being three stories or higher
- Having shared bathroom and kitchen facilities
Licences are obtained from the local council and are required per HMO property rather than per landlord. Each local authority has their own criteria for awarding HMO licences As such, it’s important that you seek information on this before deciding to apply for a mortgage.
It’s important to be aware that licences can be refused. Each local authority will assess both the property and the HMO landlord’s suitability. They can also withhold the licence until you meet their acceptance criteria.
If you require a licence for your HMO property, then renting it without one is a serious offence. It’s also unlikely that any lender will accept your mortgage application until the licence is in place.
Contact Us to discuss your HMO licence.
How can a broker help with an HMO mortgage application?
HMO mortgages are a highly specialist product. Therefore, it is strongly advisable to apply through an authorised and regulated mortgage broker. They will be able to advise you which lenders are most likely to accept your application, based on your individual circumstances.
As well as the application process being tricky to navigate without professional help, ensuring you find the right mortgage product for you is essential. This is especially true if you are looking to maximise your profits from an HMO property.
If you already have a buy to let mortgage in place and are looking to expand into HMO letting, then it may be possible to have it transferred to an HMO mortgage. This is also something that a specialised mortgage broker will be able to advise you about.
Contact Us to obtain specialist HMO advice.
If you are looking for a standard buy to let mortgage, please see: Buy to Let
News
Looking to move home or remortgage? Watch the latest vlogs from our mortgage advisors,
packed full of handy tips, to help you get on the property ladder and save on your mortgage
Different Types of Mortgages Explained
Different Types of Mortgages Explained There are many different types of mortgages If you are looking to buy or refinance a property, you’ll need
A Comprehensive Guide On Mortgage Affordability
Understanding Mortgage Affordability What is meant by mortgage affordability? When a lender talks about mortgage affordability, they are referring to the maximum amount that
Islamic Mortgage Options Explained
Islamic Mortgage Options Explained For those of the Islamic faith, mortgage finance can be confusing, particularly if they follow Sharia law. Sharia law forbids interest-bearing
Porting A Mortgage: What To Consider
Porting: What Does It Mean For Your Mortgage? What is porting a mortgage? Thinking of moving house? If you have a mortgage on your existing
How Are Mortgages Calculated?
How To Calculate Mortgage Repayments Understanding mortgage repayments Taking that first tentative step onto the housing ladder is a big deal. And if you need
The Return of 100% Mortgages: Homebuyers Guide
What are 100% Mortgages? In recent months, 100% mortgages have been reintroduced to the market, helping buyers to get on the property ladder. Offered