Specialist mortgages for Houses in Multiple Occupation, designed for landlords maximizing rental yields through multi-tenant properties.
HMO (House in Multiple Occupation) finance is a specialist lending product designed specifically for properties let to multiple unrelated tenants who share facilities. HMOs typically generate 30-50% higher rental yields than standard buy-to-let properties, making them attractive to experienced landlords seeking enhanced returns.
The UK HMO market has grown significantly as landlords seek to maximise income in a challenging regulatory environment. With proper licensing and management, HMOs can deliver gross yields of 8-15%—substantially above the 4-6% typical of standard rental properties.
However, HMO lending requires specialist knowledge. Many high street lenders won't consider HMOs, and those that do apply restrictive criteria. Specialist HMO lenders understand the market, calculate affordability based on actual room rents rather than standard stress tests, and can accommodate complex scenarios that mainstream lenders decline.
HMO lenders use actual room rents rather than applying standard buy-to-let stress tests. They multiply rent per room by number of rooms, applying a void assumption (8-11%) for tenant turnover.
Lenders require evidence of license or application. Properties must meet HMO standards including room sizes, fire safety, and amenities. Some lenders fund properties being brought up to standard.
For portfolio landlords (4+ properties), specialists assess overall portfolio health rather than each property in isolation, providing flexibility for scaling HMO portfolios.
Understanding the right scenarios ensures you're using this finance type strategically.
High-specification room lets to young professionals in city centre locations, commanding premium rents.
Properties near universities let to students on academic year tenancies.
Properties let to tenants receiving housing benefit, providing stable income with local authority backing.
Converting standard properties into licensed HMOs to maximise rental income.
| Cost Component | Typical Range | Notes |
|---|---|---|
| Interest Rate | 4.5% - 7% | Competitive for experienced landlords |
| Arrangement Fee | 0% - 2% | Many products fee-free |
| Valuation Fee | £500 - £1,500 | HMO-specific valuation |
| Legal Fees | £1,000 - £2,000 | Standard conveyancing |
| Licensing Costs | £500 - £1,500 | 5-year license typical |
| Fire Safety | £2,000 - £10,000 | Compliance requirements |
Evaluate property for HMO suitability—room sizes, layout, licensing requirements.
Determine achievable room rents and calculate yield to establish borrowing capacity.
Match your experience level and property type with appropriate HMO lenders.
Submit application with room-by-room rental schedule and licensing status.
Complete purchase or refinance with HMO-appropriate terms.
| Aspect | HMO Finance | Alternative |
|---|---|---|
| Yield | 8-15% gross typical | Standard BTL: 4-6% |
| Income Assessment | Actual room rents | Stressed market rent |
| Lending Appetite | Specialists welcome HMOs | Many lenders decline |
| Scalability | Portfolio limits flexible | Often capped at 10 properties |
For mortgage purposes, an HMO is typically defined as a property let to three or more unrelated tenants who share kitchen, bathroom, or toilet facilities. However, lender definitions can vary, with some classifying properties with 4 or 5 bedrooms as small HMOs and 6+ bedrooms as large HMOs. Properties requiring mandatory HMO licenses (5+ occupants in 2+ households) may have different lending criteria.
While HMO experience is preferred, many lenders will consider first-time HMO landlords if you have general buy-to-let experience. Some lenders have specific 'first HMO' products with slightly lower LTVs (typically 70-75%). You'll generally need to demonstrate property management capability and understanding of HMO regulations. Completely novice landlords may find options limited.
HMO lenders typically use actual room rents rather than applying a standard stress test. They'll assess the rent per room multiplied by the number of lettable rooms, often applying a void assumption (usually 8-11% to account for turnover between tenants). Some lenders require minimum rental coverage ratios of 125-145% of the mortgage payment to ensure affordability.
Yes, most HMO lenders will finance properties requiring licenses, but they'll want evidence that the license is in place or has been applied for. Properties must meet HMO standards including room sizes, fire safety requirements, and amenity provisions. Some lenders will advance funds for properties not yet licensed if you're undertaking works to bring them up to standard.
Typically a property let to 3+ unrelated tenants sharing facilities. Lender definitions vary—some classify 4-5 beds as small HMO, 6+ as large. Properties requiring mandatory licenses (5+ occupants, 2+ households) may have different criteria.
Experience preferred but not essential. Many lenders consider first-time HMO landlords with general BTL experience. Some have specific "first HMO" products at 70-75% LTV. Completely novice landlords face limited options.
Specialists use actual room rents (rent per room × number of rooms), applying 8-11% void assumption for turnover. Some require 125-145% rental coverage of mortgage payment. This often allows higher borrowing than standard BTL assessment.
Yes, most lenders finance licensable properties with evidence that license is in place or applied for. Properties must meet HMO standards (room sizes, fire safety, amenities). Some advance funds for properties being brought to standard.
Dedicated hmo finance specialists with deep market knowledge.
Access to an extensive panel of specialist lenders.
Adhering to strict professional and ethical standards.
Proven track record in property finance.
Our local specialists understand the property market in your region and can provide tailored advice.
Specialist funding for ground-up construction and major refurbishment projects, providing flexible f...
Fast, flexible short-term finance for commercial property transactions with decisions in as little a...
Second charge lending that sits behind your primary mortgage, unlocking additional equity for proper...
Residential investment property mortgages for individual landlords and portfolio investors, with pro...