A message from HMO Mortgage Brokers | Houses in Multiple Occupation (HMOs) remains in strong demand from tenants across the UK. They offer affordable rent, shared living spaces, and flexible accommodation. Whether aimed at students or young professionals, HMOs continue to attract interest due to their practicality and lower living costs.
The key to success in HMO investing lies in securing the right mortgage finance from the start. As HMO mortgage specialists, we offer clear, structured advice for this specific property investment area.
We can assist whether you’re a new landlord converting a single house or an investor with a licensed multi-let portfolio. Our team understands the detailed criteria lenders require and can guide you through every step of the mortgage process.
We can support you with:
- Converting a standard home into a compliant HMO under UK regulations
- Refinancing an existing HMO to release equity or improve rental return
- Purchasing licensed HMOs or accommodation for student tenants
- Expanding into semi-commercial or multi-unit HMO investments
Some lenders may consider HMOs complex, but we know how to present your application clearly and correctly. We work with lenders who understand HMOs and offer mortgage products designed for this investment type. Our goal is to match your circumstances with finance that suits your plans and meets UK lending criteria.
What Is an HMO Mortgage and How Does It Work?
An HMO mortgage is a specialist loan used to finance properties rented to three or more tenants from households sharing common facilities such as kitchens and bathrooms. Lenders consider HMOs higher risk than standard buy-to-let mortgages due to more intensive management needs and the potential for void periods.
Key Features of HMO Mortgages:
- Typically, interest-only, with the capital repaid at the end of the term.
- Requires larger deposits, often 25–40% of the property’s value.
- Rental income assessments are more detailed, with lenders often requiring rental cover ratios of 145–170%.
- Properties may need mandatory licensing, especially those with five or more tenants.
Personal preference matters too. Some borrowers choose to work with advisers who speak their first language or share a similar cultural understanding. Connect Experts allows you to search for bilingual mortgage brokers and browse A-Z mortgage brokers, helping you find a second charge specialist who fits both your financial needs and personal preferences.
💡 Did You Know?
The average rental yield for HMOs is significantly higher than standard buy-to-lets, up to 8–10%, compared to 4–6% for single-let properties.
Types of HMO Mortgages
HMO mortgages are structured around property size, occupancy, and ownership type. The right option depends on how the property is operated and the landlord’s wider plans.
Small HMO Mortgages
These mortgages typically apply to properties with three or four tenants. These properties may fall outside the scope of mandatory licensing in some local authorities. Lenders often view small HMOs as lower risk. This can make them easier to finance than larger shared properties.
Large HMO Mortgages:
Large HMO mortgages are designed for properties with five or more tenants. These properties normally require mandatory HMO licensing and enhanced fire safety measures.
Because of the higher occupancy levels, lenders assess these cases more closely. Rental income sustainability and management experience are key factors.
Portfolio HMO Mortgages
Portfolio HMO mortgages are suitable for landlords who own multiple HMO properties. This approach allows several properties to be assessed together within a single borrowing structure. It can improve borrowing efficiency and support long-term portfolio planning. You can explore suitable options through our HMO mortgage advisers who specialise in complex portfolios.
Limited Company HMO Mortgages
Limited company HMO mortgages are commonly used by landlords operating through an SPV structure. This is often linked to tax planning following the Section 24 changes to mortgage interest relief. Lenders will review the company setup, director experience, and financial accounts. Our limited company mortgage brokers can help assess lenders’ requirements before you apply.
Market Insight
HMO demand continues to grow across the UK. This is driven by student housing needs and demand for shared rental accommodation in urban areas. If you are considering this type of investment, speaking with experienced buy-to-let mortgage advisers can help ensure the structure fits your goals and lending criteria.
Why Work with a Specialist HMO Mortgage Broker?
HMO investing can offer strong returns, but the financial rules are often complex. Lender criteria vary widely, and small errors can lead to delays or declines. Working with experienced HMO mortgage brokers helps ensure your application is structured correctly from the start.
Access to Specialist HMO Lenders
Specialist HMO mortgage brokers have access to a wide panel of lenders, including providers not available directly to the public. This allows brokers to source competitive terms, assess higher loan-to-value options, and identify lenders suited to your specific HMO structure. Faster lender matching can also lead to quicker decisions and smoother progress.
Pre Underwriting and Application Review
Before submitting your case, experienced brokers carry out detailed checks on affordability, rental income, and property setup. This early review helps identify potential issues that could affect approval. It also reduces the risk of unnecessary delays once the application reaches the lender. Using a broker who understands HMO criteria improves the quality of submissions and lender confidence.
Full Case Management Support
HMO mortgage applications involve more than just finance. Licensing, valuations, and legal requirements must all align. Specialist brokers manage the process from start to finish. This includes working with valuers, liaising with solicitors, and ensuring lender conditions are met. This support allows investors to focus on portfolio growth rather than administration.
Funding Options for HMO Conversions
Some lenders offer funding for HMO conversions, with funds released in stages. This can support refurbishment works and property upgrades as the project progresses. Criteria and availability vary, so expert advice is essential. If you are expanding or converting a property, speaking with HMO mortgage brokers who understand development-style lending can be beneficial.
What First-Time HMO Investors Need to Know
If you are new to HMO investing, there are several key points to understand before moving forward.
HMO Licensing
Check with your local council to confirm whether your property requires an HMO licence. Licensing rules vary by local authority and depend on property size and occupancy.
Planning Permission
Some properties require planning consent before being used as an HMO. This may involve a Change of Use under C4 or Sui Generis classifications. Local planning rules should always be reviewed.
Valuation Method
HMO properties are often valued based on rental income rather than open market value. This can affect borrowing limits, interest rates, and lender choice. Speaking with an HMO mortgage broker can help clarify lender expectations.
Tenancy Agreements
Most lenders prefer Assured Shorthold Tenancies or separate tenancy agreements for each occupant. The structure of your tenancies can influence mortgage approval.
Landlord Experience
Some lenders require prior HMO experience before approving finance. If you are a first-time HMO investor, using the find a mortgage adviser service can help you match with lenders who are open to new landlords.
Market Insight
According to the English Housing Survey, more than 38% of renters aged 25 to 34 live in shared accommodation. This continues to support demand for well-managed HMO properties across the UK.
Let’s Make Your HMO Investment a Success
At Connect Experts, we help both first time landlords and experienced investors navigate the HMO mortgage market with confidence. HMO finance is more complex than standard buy to let lending and requires specialist knowledge.
Whether you are converting a terraced property into a licensed HMO or refinancing an existing HMO to improve cash flow, our advisers focus on structuring your mortgage correctly from the outset. This includes assessing rental income, licensing requirements, and lender criteria.
Using an experienced HMO mortgage broker can help you avoid common issues such as incorrect property classification, unsuitable lender selection, or delays caused by local authority licensing rules.
Through our find a mortgage adviser service, you can connect with brokers who regularly handle HMO cases and understand multi-let properties, valuation methods, and stress testing requirements.
All advice is provided by FCA-regulated professionals. Mortgage availability and terms depend on your personal circumstances and lender criteria. Your property may be repossessed if repayments are not maintained.
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FAQ: HMO Mortgage Brokers
| Question | Answer |
|---|---|
| What is an HMO mortgage? | An HMO (House in Multiple Occupation) mortgage is a specialist type of buy-to-let mortgage designed for properties rented to three or more tenants who are not part of the same household but share facilities such as a kitchen or bathroom. |
| Why do I need a specialist HMO mortgage broker? | HMO mortgages have stricter criteria and are only offered by selected lenders. A specialist broker understands these requirements, helps you meet licensing rules, and identifies lenders comfortable with multi-tenant properties. |
| Can first-time landlords get an HMO mortgage? | Some lenders accept first-time landlords, but most prefer applicants with previous buy-to-let experience. An experienced broker can guide you to lenders who are open to new investors or those converting properties into HMOs. |
| Do I need an HMO licence to apply for an HMO mortgage? | Yes, most lenders require proof of an HMO licence or confirmation from your local authority that one will be granted. A broker can help you understand local licensing rules and prepare documentation before submitting an application. |
| What deposit do I need for an HMO mortgage? | Typically between 25% and 35% of the property’s value. The exact amount depends on your experience, the rental income potential, and the property’s valuation. |
| Are interest rates higher on HMO mortgages? | Usually yes, as lenders view HMOs as higher-risk investments. However, the increased rental yield from multiple tenants can offset the higher rate. A broker can help you find the most competitive deals available. |
| Can I remortgage my existing buy-to-let to an HMO? | Yes, many landlords convert single-let properties into HMOs to boost rental income. You will need a valuation, updated planning approval if required, and an HMO licence. Brokers can help you with both the conversion and remortgage process. |
| Do lenders have specific property requirements for HMOs? | Yes. The property must meet safety and room size standards, have sufficient amenities, and comply with fire safety regulations. Some lenders have minimum or maximum bedroom limits. |
| How can a broker help me get better HMO mortgage rates? | A broker compares products from both mainstream and specialist lenders, some of which are not accessible directly to landlords. They can present your case in a way that highlights your experience and property profitability to secure better terms. |
| Can I get an HMO mortgage through a limited company? | Yes. Many landlords use a limited company structure for tax efficiency. Specialist brokers regularly arrange HMO mortgages for limited companies and can advise on lender preferences and documentation needed. |