HMO mortgages: up to 80% LTV
An HMO (house in multiple occupation) is let by the room to three or more tenants who aren't one household and share a kitchen or bathroom. Lenders on our panel lend up to 80% loan to value on HMOs, so a 20% deposit, the same as a standard buy-to-let. Each case is assessed individually and is subject to the lender's underwriting and valuation.
| HMO type | Up to | What lenders look at |
|---|---|---|
| Small HMO (3–6 tenants) | 80% | Licence if needed, room sizes, the rent |
| Large HMO (7+ tenants) | 80% | Sui generis planning, the licence, your experience |
| Multi-unit freehold block | 80% | Number of units, separate titles or one |
| Bought to convert into an HMO | Bridge, then 75–80% | Works, planning and licence before the long-term mortgage |
Is an HMO mortgage harder to get?
Not if the paperwork is in order. The difference from a standard buy-to-let is what lenders check:
- Experience. Many lenders want you to have run a buy-to-let for a year or two. Some will lend to first-time HMO landlords, and a few to first-time landlords, particularly on smaller HMOs.
- Licensing. HMOs with five or more tenants from two or more households need a mandatory licence, and many councils license smaller HMOs too. Lenders want the licence, or proof it has been applied for.
- Planning. Converting a house to a small HMO is usually permitted development, except where the council has an Article 4 direction. HMOs for seven or more people need sui generis planning permission.
- Room sizes and layout. Bedrooms must meet the minimum sizes (6.51m² for one adult), and lenders check fire safety and kitchen and bathroom ratios.
How lenders value an HMO
This is where lender choice matters most. Many lenders value an HMO on bricks and mortar: what it would sell for as an ordinary house. Others value it on an investment basis, from the rent it produces, which is often well above the bricks-and-mortar figure for a good HMO. On the same property, the investment valuation can mean a much bigger mortgage. We match HMOs to lenders that value them on the basis that suits the property.
The rent test on an HMO
Lenders test the gross room rent against the interest at 125% (limited companies and basic-rate taxpayers) or 145% (higher-rate taxpayers), worked out at a stress rate. Because HMOs earn more rent than a single let, the rent test is rarely what stops an HMO mortgage. Some lenders apply a slightly higher cover ratio to HMOs, which is why the most flexible lenders are worth finding.
HMO mortgage rates
HMO rates usually sit a little above standard buy-to-let rates, and the gap narrows at lower LTVs and for experienced landlords. Fees are often a percentage of the loan. See live HMO products in our product sourcing tool.
Converting a house into an HMO
Most lenders won't give a long-term mortgage on a house that's mid-conversion. The usual route is to buy with a short-term bridging loan, do the works, get the licence and tenants in, and then refinance onto an HMO mortgage on the new value. Several lenders on our panel will do that within six months of purchase. See remortgage within 6 months on today's value and the bridging loan calculator.
Personal name or limited company?
Most HMO landlords now buy through a limited company: the rent test is 125% whatever your tax rate, and the company can deduct mortgage interest. See limited company buy-to-let and the Section 24 calculator. For the deposit, see 80% LTV buy-to-let.
Frequently asked questions
What LTV can I get on an HMO mortgage?
Up to 80% loan to value with lenders on our panel, so a 20% deposit, subject to underwriting, valuation and the rent test.
Can a first-time landlord get an HMO mortgage?
Some lenders will, especially on smaller HMOs. Many more lend to first-time HMO landlords who already own a buy-to-let.
Do I need a licence before getting an HMO mortgage?
Lenders want a licence where one is required (five or more tenants from two or more households, or under a council's additional licensing scheme), or proof it has been applied for.
How are HMOs valued for a mortgage?
Either on bricks and mortar, as an ordinary house, or on an investment basis from the rent. An investment valuation is often higher on a good HMO, so lender choice matters.
Are HMO mortgage rates higher?
Usually a little higher than standard buy-to-let rates, narrowing at lower LTVs and for experienced landlords.
Can I get a mortgage to convert a house into an HMO?
Usually with a bridging loan first, then a refinance onto an HMO mortgage once the works, licence and tenants are in place, often within six months on the new value.
Can I get an HMO mortgage through a limited company?
Yes. Most HMO lenders lend to limited companies (SPVs), usually with a 125% rent test whatever your personal tax rate.