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HMO Mortgages

Today’s HMO Mortgage Rates

2 Yr Fixed2.29%31/07/20242.00%75%
2 Yr Fixed3.09%31/07/2024£99575%
5 Yr Fixed2.99%31/07/20272.00%75%
5 Yr Fixed3.34%31/07/2027£99575%

Mortgage requirements to purchase or remortgage an HMO property

HMO mortgage lenders will generally require that borrowers:

  • Have experience as a landlord (no first-time landlords) – this applies to the primary borrower only. A non-experienced landlord could apply with an experienced landlord.
  • Have an HMO licence for the property provided by the local authority
  • the property will need to have planning permission and building regulations for its current layout
  • lenders will have a minimum valuation for an HMO property
  • lenders will have a maximum number of stories for an HMO property
  • lenders will have a minimum sqm area requirement for single and double bedrooms in an HMO property
  • lenders may only offer to lend based on the rental potential of the property under an AST rather than the HMO rental

Requirements to obtain an HMO mortgage

Borrowers will need to provide:

  • proof of identification
  • proof of residency
  • proof of earned income
  • proof of submitted tax returns (if self-employed)
  • proof of received rental income (from subject or other properties)
  • proof of mortgage payment (from subject or other properties)

Frequently Asked Questions

What is a HMO Mortgage?

An HMO Mortgage is a lending offer specific for the buy-to-let market for properties where there are multiple tenants.

Can you get a mortgage on HMO?

Yes, you can get a mortgage on a HMO property. These are buy-to-let mortgages specific to the HMO market and are best arranged via an experienced mortgage broker.

Is a HMO mortgage the same as a buy-to-let?

An HMO mortgage is a buy-to-let mortgage but whereas a standard buy-to-let mortgage is designed for properties that have a single-family group as tenants, an HMO Mortgage covers properties that have multiple tenants.

Which lenders do HMO mortgages?

Most of the specialist buy-to-let mortgage lenders and a couple of high street lenders do HMO mortgages. It is a complex market, however, so it is always best approached through a specialist mortgage broker.

Can I get a HMO mortgage as a first-time buyer?

It is extremely rare for lenders to offer HMO mortgages to first-time buyers.

Further HMO Mortgage complications

There are close to two dozen lenders in the market that will state that they do HMO lending. Due to complexities in the HMO market, many of the lenders have criteria that means that they are rarely accommodating to HMO landlords. Each particular HMO application can have certain nuances that can cause a problem with a particular lender.
These can include issues around:

  • credit file
  • experience as a landlord
  • personal income of applicants
  • age of applicants
  • applicants property portfolios
  • property type
  • property set up
  • property valuation
  • property location
  • property rental income

What are HMO mortgages (Houses in Multiple Occupation)

HMO (Houses in Multiple Occupation) mortgages are a specialised buy-to-let mortgage product for use when lending against properties with multiple tenants from more than one household.
These can be properties let room by room, student let’s, or property split into individual units sharing facilities.
A borrower is highly unlikely to be able to obtain an HMO mortgage without the assistance of an experienced HMO mortgage broker.
Interest rates on HMO mortgages are generally higher than on standard buy-to-let mortgages
The attraction of houses in multiple occupation for the landlord is of course the rental potential against the value which can be considerably higher. Should be remembered however that HMOs are considerably more complex and expensive to set up and manage.
For this reason, they are unlikely to be suitable and are not recommended for inexperienced or first-time landlords.

Housing Act 2004 HMO Definitions

The 2004 act defined an HMO as a property with at least three tenants forming more than one household sharing a toilet bathroom or kitchen facility with other tenants.
A large HMO was defined if there are at least five tenants forming more than one household sharing facilities.
For the purposes of the act, a household is a single person or members of the same family who live together. Family includes people married living together alternate or same-sex, relatives, half relatives, step parents step children.
All large Houses in Multiple Occupation must be licensed.

with regard to safety, landlords of HMOs must make sure that:

  • the property has working smoke alarms and proper fire safety measures
  • annual gas safety checks are carried out
  • electricity checks are made every three years
  • there is no overcrowding
  • there is sufficient cooking and bathroom facilities for the number of tenants
  • communal areas are in good repair and clean
  • there is sufficient provision for rubbish/waste

with regard to communal areas, landlords of HMOs must ensure upkeep of:

  • structure and exterior of the house including walls, window frames, gutters
  • water and gas piping
  • electrical wiring
  • basins, sinks, baths and toilets
  • fixed heaters (radiators) and water heaters

Conditions when applying for an HMO licence

  • the house must be suitable for the number of tenants (with regard to size and facilities)
  • the person managing the property must be “fit and proper” (e.g. no criminal record)
  • smoke alarms must be installed and maintained
  • safety certificates for all electrical appliances must be available
  • gas safety certificate must be available

each local authority may have additional requirements at the point of application

The Licensing of Houses in Multiple Occupation (Mandatory Conditions of Licences) (England) Regulations 2018 – in force from 1st October 2018

These are amendments to Schedule 4 of the Housing Act 2004

  • Definition of HMO Changed
  • Requirement for HMO to have 3 stories removed
  • A property occupied by 5 or more people forming 2 households requires a Mandatory Houses in Multiple Occupation (HMO) Licence

Landlords should note that even where a property does not meet criteria for Mandatory HMO Licensing any Local Authority may still run Discretionary Licensing.

When is Mandatory Houses in Multiple Occupation (HMO) Licence required?

Example 1
2 X Grandparents
2 X Parents
2 X Children
5 or more persons, but they are related so are one Household and not subject to HMO

Example 2
5 or more students or professionals
5 or more persons a mandatory HMO licence is required as deemed as 2 or more households

Example 3
Freehold Property – 2 self-contained units
3 people in unit 1
1 person in unit 2
No HMO Licence is required if 4 or fewer occupants in total

Example 4
Freehold Property – 2 units sharing facilities
3 people in unit 1
2 people in unit 2
Licensing required as 5 occupants making up two households

Example 5
Freehold property – 3 self-contained flats
3 people in unit 1
2 people in unit 2
4 people in unit 3
No mandatory licence is required as no sharing of facilities and none of the units is occupied by or more persons

Example 6
Freehold property – 3 self-contained flats
1 person in unit 1
2 people in unit 2
6 people in unit 3 on 2 AST agreements
A mandatory licence will be required for the unit with 2 households

Example 7
House conversion
1 person in unit 1 self-contained flat
some shared facilities and 2 ASTs in unit 2
some shared facilities for 5 sharers in unit 3
A mandatory licence will be required as 5 or more persons forming 2 or more households

Amendments include new provisions that require the HMO licence holder to ensure that the floor area is sufficient for the occupants of sleeping accommodation (bedroom):

  • If the room is used by two persons over 10 years of age the minimum area is 10.22 square metres
  • If the room is used by one person over 10 years of age the minimum area is 6.51 square metres
  • If the room is used by one person under 10 years of age the minimum area is 4.64 square metres

(When calculating the floor area of a room, any area where ceiling height is under 1.5 metres is discounted)