HMO Mortgages

Many HMO mortgages are for self-employed landlords and investors who choose to either buy in their personal names or via a limited company buy to let.

Just like with an employed applicant, with self employed mortgage advice you’ll have to evidence earnings in the same way along with the income and potential income from your investments.

• They’re Specific! – HMO mortgages are designed for landlords who own properties that meet the HMO classification, which typically means they are larger properties rented out to multiple individuals or households. 
• Licencing – With HMO properties you’ll often require specific licenses from the local authorities, and lenders providing HMO mortgages might consider this and you’ll need to evidence yours as part of their lending criteria. 
• Increased Rates – Due to the increased risks associated with multiple tenancies and potential void periods, HMO mortgages might have different interest rates, fees, and eligibility criteria compared to standard buy-to-let mortgages. HMOs are commonly let by students and young professionals who are unable to meet the full cost of the property themselves.  
• Mortgage Criteria – Lenders offering HMO mortgages often have specific criteria regarding property size, bedroom dimensions, location, tenant profile, and licensing. Your lender may require a higher deposit depending on your situation and you might be bound by stricter rules compared to traditional buy-to-let mortgages. 
• Rental Income – Buy to let Lenders assessing HMO mortgage applications often consider the property’s potential rental income more extensively, as HMOs generally generate higher rental yields than standard properties.  It’s common for portfolio landlords to have complex spreadsheets with their income and expenditure clear. 
• Regulation – HMO mortgages might involve additional considerations regarding compliance with regulations, especially those related to fire safety, property standards, and local authority requirements.  There will most certainly be hurdles with your lender to overcome along the way.  

Given the complexity and specific nature of HMO properties, mortgages for such properties cater to the unique challenges and opportunities presented by this type of rental investment.  

Buy to let landlords interested in HMO mortgages should carefully consider these aspects and ensure they meet the criteria set by lenders before applying for such mortgages. 

This is where the help and assistance of an experienced HMO mortgage broker will prove invaluable and could save you both time and money.  

A typical definition of an HMO would be a property occupied by 5 or more people, 5-7 lettable rooms and property with more than one tenancy agreement in place. 

Houses that are subject to selective licencing are only classified as HMOs where at least one of the above conditions are met. 

As a knowledgeable mortgage broker, we can provide the guidance and support you need to get you through the HMO mortgage journey. 

No, you must take out a specific type buy to let mortgage aimed at HMO Landlords. Not all buy to let lenders will lend on HMO’s and those that do often have a specialist range of products. 

It’s important to see help from a mortgage broker to help save you time and money.  

If you are looking to let out your current property to buy a new one, this is called a let to buy mortgage.

The minimum deposit varies from lender to lender, but it would be no less than 25%. 

The amount of deposit you will be determined by the value of the property and how much rental income you are going to receive from your investment. 

HMO properties also have a higher refurbishment and upkeep cost than a regular buy to let due to the increases rules and regulations surrounding them.

Like any other buy to let application, your new HMO mortgage lender will instruct a local independent valuer to confirm the property’s value and provide an indication of how much income you are going to receive from the property to gauge if the Investment is worthwhile.  

For the right investors, yes! Others, no! You need a lot of money to get started and to fund the upkeep, maintenance, and legal costs.  

Often, HMOs are purchased by professional landlords, those that are used to dealing with the regulation and know what they are doing.  

For first time buyer buy to let landlords you’d struggle getting an application approved as you’ll need to evidence that you have experience in this area of investment.  

To many, becoming a landlord for an HMO property means great reward, as multiple incomes can often contribute to a higher profit margin than if you were receiving rent from a single party, such as a family. 

The downsides are that these mortgages tend to be more expensive and often entail signing on students or non-professionals as tenants, meaning income may be seasonal and inconsistent. 

Although a stereotype that doesn’t encompass everybody, student tenants are regularly known to leave the property in a less favourable state, requiring further expendable income for repairs.

With the knowledge being a mortgage broker, we can answer any questions you may have keeping the technical jargon to a minimum.  

We have dealt with lots of HMO mortgages before so we can provide the guidance and support you need throughout the HMO mortgage.

Yes, just like with a traditional mortgage you’ll be able to remortgage a HMO property and have options such as taking a product transfer with your current lender, a remortgage to a new lender and capital raising to release money.  

Also, alternative products are available if you are looking to release money such as a secured loan, further advance, or bridging finance, what we’ll recommend will depend on any early redemption charges on your existing deal and what you are looking to achieve with the new money.  

As part of the HMO buy to let remortgage advice process, your experienced mortgage broker will advise you accordingly with the best product.