A HMO mortgage is a specialist form of mortgage that is applicable to properties housing a certain number of tenants. They can be seen as a more complex form of mortgage and as a result, they are typically only offered by specialist mortgage lenders. 

What is a HMO property?

A HMO property or ‘house in multiple occupation’ is classed as a property with at least three unrelated tenants, who share facilities such as a bathroom or kitchen. It’s important to emphasise the fact that the tenants have to be unrelated, so if you are a family of more than three, who share facilities, your home will be classed as a residential property and therefore, a residential mortgage would be a more suitable option. 

HMOs can be a popular choice with both landlords and tenants, this is because rent can be cheaper than that of a general buy to let property and for landlords, gross yields are typically better in comparison to a standard buy to let. However, this is not to say that HMO mortgages are a walk in the park. There can be a lot of legislation involved, which is why it is beneficial to approach a specialist mortgage lender, so you can maximise your acceptance potential. 

HMO mortgage lending criteria

As is the case with most mortgage types, there is not one textbook approach that will guarantee your acceptance. Mortgages are incredibly subjective products in general and the same applies to HMO mortgages. Generally, mortgage lenders tend to base their decision on the number of rooms a property has, if you are an experienced HMO landlord or if the property in question requires a license from the local council. Mortgage lenders will also look at other general factors such as your credit history, personal income and whether you are a UK resident, as they would do for any other type of mortgage application.

HMO licences

In some cases, a HMO property will require a licence from the local council where the house is situated. This is more common among larger HMO properties. A property is classed as a large HMO property if:

• The property is rented to five or more people. 

• If the property is at least three storeys high.

• If the tenants share facilities, such as kitchen or bathroom.

It’s not just large HMO properties that require a licence, there are some smaller HMOs that will require a licence - so it is always important to check whether your property legally requires one. 

HMO properties within a limited company

Like other forms of mortgages, you can apply for a HMO mortgage through your limited company. This is often seen as a tax-efficient way of obtaining a HMO mortgage, as the limited company aspect entitles you to different tax regulations than if you were to apply through standard means.

High street lenders don’t tend to offer mortgages through a limited company and as a result, people think they are impossible to obtain. Albeit, they are not necessarily a walk in the park, as HMO mortgages have a number of requirements to consider. However, approaching a specialist lender, who is experienced with limited company mortgages is likely to maximise your chances. 

Are there any limitations to a HMO property?

When it comes to obtaining a HMO mortgage, it’s important to note that some lenders will have restrictions on the number of bedrooms the HMO can have - most commonly, the limit is five, but this can vary from lender to lender and some don’t have any limits at all. There can also be some restrictions on the number of kitchens a HMO property has - it can be quite common for student HMOs, in particular, to have more than one kitchen and again, some lenders may not accept this. 

Get in touch

HMO mortgages are a specialist type of mortgage and therefore, having access to a market of lenders is likely to maximise your chances of being accepted, which is why approaching an experienced mortgage broker like us is a great option. If you are interested in a HMO mortgage or you would simply like to know more information, then get in touch with us today.  

Commercial mortgages and some buy to let mortgages are not regulated by the Financial Conduct Authority.