HMO mortgages

What is an HMO?

An HMO is a house in multiple occupation - that is, a property shared by three or more tenants who are not part of the same household. It will often be a flat or house shared by students or working people who can’t afford to rent a whole property on their own.

Each unit within an HMO is rented by a  household, which can be a single person, couple or family. The households have their own private space but share other spaces, such as cooking areas, living rooms or bathroom facilities. Each usually has its own tenancy agreement, although there may be one between them in the case of students.

Some landlords like having HMOs because they tend to be more profitable. Because you can charge per room, you usually make more cash overall. However, if you are planning to buy a house to rent out in this way, you’ll need a specialist HMO mortgage. 

When do you need an HMO mortgage?

You’ll need a specialist HMO mortgage if:

• You plan to let a property to three or more unrelated tenants with shared facilities, and

• You intend to sign separate tenancy agreements for each room or household.

Some lenders label such products explicitly as “HMO mortgages,” while others let you convert a regular buy-to-let mortgage into one that supports multi-let.

Licensing and regulation matters:

• In England and Wales, a mandatory HMO licence is required in many cases (e.g. when there are five or more occupants or more than three storeys).

• Scotland and Northern Ireland require registration/licensing more broadly for HMOs.

• The person managing the property (you or an agent) must be “fit and proper,” with no serious legal or landlord law breaches.

If you try to use a standard buy-to-let mortgage for an HMO, you risk breaching the lender’s terms — which could lead to penalties or even repossession.

HMO mortgage criteria

Lenders impose stricter requirements for HMO mortgages compared to conventional buy-to-let products. Expect conditions relating to both you (the borrower) and the property.

Common Borrower Criteria

• Experience: Many lenders prefer 1–2 years’ experience as a standard or HMO landlord. Some may accept first-time landlords, but with more restrictive terms.

• Income & Credit Profile: You’ll need to demonstrate sufficient personal income or business income to cover mortgage payments during void periods. Adverse credit might make your application harder to approve.

• Maximum Age / Term Limits: Some lenders place age caps at the end of the mortgage term.

• Deposit / Equity: Many HMO lender require a minimum deposit of 20–25%, though some may consider lower (e.g. 15–20%) in certain cases.

Property Criteria

• Minimum Property Value: Often £75,000 to £100,000 base valuation is required.

• Maximum Storeys / Floors: Many lenders won’t underwrite HMO mortgages on buildings over four habitable storeys.

• Maximum Bedrooms / Lettable Units: Some limit HMOs to 6 or 8 rooms or fewer.

• One Kitchen Only: Usually only one shared kitchen is permitted.

• Communal Living / Shared Areas: A designated shared area or lounge is often a requirement.

• Valuation & EPC: Many lenders require a specialist valuation and a valid EPC rating (often at least “E”) for HMO properties.

• Licence / Planning Evidence: If licensing is required (or applied for), proof should accompany the application. Some lenders will reject applications if licensing is incomplete.

How much can you borrow for a HMO mortgage?

Most HMO mortgages allow you to borrow up to 75% of the property’s value (LTV), though some specialist lenders may go as high as 80% for experienced landlords. Because HMO mortgages are seen as higher risk than standard buy-to-lets, lenders tend to be more cautious about how much they’ll lend.

They’ll also run a stress test to check your rental income can cover repayments if rates rise - often using a notional rate of 5.5% or more. On top of this, lenders apply an Interest Coverage Ratio (ICR), which usually requires your rent to cover 150–175% of the mortgage interest payments.

In short, your total rental income needs to comfortably exceed your mortgage costs to prove the investment is sustainable, even with potential voids or maintenance expenses.

Why are HMO mortgages harder to get?

HMO mortgages are more difficult to secure than standard buy-to-let loans because lenders see them as higher risk. With multiple tenants, there’s more chance of turnover, void periods and complex management, so interest rates are usually higher.

Most lenders also prefer borrowers with some landlord experience, and many HMO deals are only available through specialist brokers. Running an HMO can be demanding too - you’ll need to handle more maintenance, licensing and safety checks, as well as longer void periods between tenants.

Licence fees can cost £500 to over £1,000, and failure to comply with local regulations can lead to fines. For these reasons, many landlords start with a single-let property before moving into HMOs.

Which lenders offer HMO mortgages?

Because HMO mortgages are specialised, many deals are only accessible through brokers. Some lenders known for HMO (or multi-let) lending include:

• Aldermore

• Foundation Home Loans

• Kent Reliance

• Landbay

• Leeds Building Society

• LendInvest

• Paragon Bank

• Precise Mortgages

• The Mortgage Works

This list is not exhaustive - a good HMO mortgage broker will survey the full market to find the most suitable deal.

Using an HMO mortgage calculator

An HMO mortgage calculator is a useful tool to estimate:

• How much you can borrow

• What your monthly repayments might be

• Which deals might suit your scenario

These calculators typically ask for property value, deposit, term, and projected rental income. Just remember: different calculators may yield different results - use several for comparison.