HMO Lending

Let us find the right HMO mortgage lender for you

HMO property can yield fruitful results for a buy-to-let landlord, but it's not always straightforward. 

At The Lending Channel, we are dedicated to finding the right HMO buy-to-let mortgage for you, allowing you to enjoy the benefits of rental income with minimal stress.

What is an HMO?

Houses in multiple occupation, or HMO, are property with multiple unrelated tenants (more than three).

These 'house shares' are often favoured by students and young professionals, as renting per room is generally cheaper than studio spaces or one-bedroom flats, meaning they are in high demand and can net landlords a lot of profit.

How are HMOs different from other rental properties?

The biggest draw from a landlord perspective is that these properties are more profitable than your standard buy-to-let. Although costs are lower for the tenants, charging per room enables the landlord to charge more overall. This is more lucrative than letting the entire property out to a singular family, for example.

Of course, with greater reward comes greater risk. HMO properties are typically more challenging to manage, have a higher tenant turnover and require a more active landlord presence.

What mortgage do I need for HMO properties? 

If you're investing in your first HMO buy-to-let property, or you're adding to your portfolio, you will need a particular mortgage designed explicitly for HMO property. 

Key differences between HMO mortgages and a typically buy-to-let include:

  • Expense
  • Experience
  • Licensing
  • Property requirements

HMO mortgages are often more expensive in terms of both fees and interest, which might chip away at your profit margins. This is why it is a good idea to weigh up your costs and consider whether the added expense and effort of an HMO mortgage will be worth your while.

To be attractive to prospective lenders, there may be requirements about your property that you will have to meet. These could pertain to communal spaces and their nature (i.e. if they are substantial enough for tenants to sit in), maximum bedrooms, storeys, or any number of other factors. If you're planning to renovate the property before seeking tenants, you will have to get permission from the lender in advance. 

Who can get an HMO mortgage? 

One of the most significant differences between an HMO mortgage and a standard buy-to-let mortgage is that HMO mortgages are generally only available to experienced landlords. In fact, some lenders will refuse to accept applications from landlords with less than two years of letting experience.

If this is your first buy-to-let property, you'll likely struggle to be approved for an HMO mortgage. In that case, it's wise to start with less complex investment and to build experience by first letting property to a single household.

If, after some time, you wish to convert an existing property into an HMO property, you can do that; get in touch, and we can discuss the option of remortgaging your property into an HMO.

Another requirement for this type of specialist mortgage is an HMO license that landlords are required to have. Granted by the local council and are valid for five years, a landlord whose property is occupied by five people or more (from two or more separate households) will require an HMO licence. However, this can vary, so it's best to check the policy with your council.

It is also important to note that you will need a substantially larger deposit for this type of mortgage. We can work with you to perform a 'stress test' when considering your application and make sure we help you find a mortgage that's right for you.

We are here to help you

The Lending Channel has many years of broker experience. With our detailed knowledge, we can help you determine precisely what kind of HMO mortgage prospective lenders will deem you able to afford and target those you are most likely to be accepted by.

Considering all of these complex factors can be overwhelming. We are here to listen to your requirements and concerns and negotiate an appropriate deal for you with a trustworthy lender. Give us a call today.

The Lending Channel is a member of the National Association of Commercial Finance Brokers (NACFB).

2/1 King James VI Business Centre, Friarton Road, Perth, PH2 8DY
Tel: 01738 583008 | Fax: 01738 500402

The Lending Channel are authorised and regulated by the Financial Conduct Authority.
Company number SC334818
Data Protection Act: Z2030159


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