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HMO mortgages – what you need to know

Applying for HMO mortgages is a very similar process to standard buy to let mortgages, however there a few key differences with owning and running these types of properties which landlords need to be aware of before considering investing in this area.

Houses in multiple occupation (HMO) can be more profitable than a standard rental property because landlords typically rent each bedroom individually. For example, a three-bedroomed house in Manchester may rent for £800 per month, whereas one bedroom in a three-bedroomed HMO property in Manchester may rent for £350 per month. Therefore, the total income generated by renting each individual room in the HMO property each month would equal £1050 per month.

From the tenant’s perspective living in a HMO can be a popular choice because the rent charged is often more affordable because the communal areas of the house are shared with other people.

Lenders who offer HMO mortgages

When it comes to purchasing or remortgaging a HMO the process is very similar to that of a standard buy to let. Our whole of market Mortgage Brokers will search all the lenders in the marketplace to find you the best deal and assess affordability based on the lender’s requirements. If you are struggling to meet the lender’s affordability assessment, then we may be able to use other income to demonstrate to the lender that you have additional income available to top-up the income from the property if required.

Most lenders do require to see that you have some experience of renting standard buy to let properties before offering a mortgage on a HMO, usually a minimum of 12 months. Some will consider first time landlords however the products may be priced higher or an experienced guarantor may be required on the mortgage. The maximum loan to value offered by a small number of lenders is 80%.

Cost implications of renting a HMO

Whilst higher rents appear attractive, the cost of running a HMO is generally more costly and time-consuming. On a basic level, you have more tenants to manage and you may be involved in resolving disputes between tenants in the same property.

The additional costs to consider include:

HMO license – From October 2018, all HMOs with five or more tenants regardless of the number of storeys will now require a license. The proposed HMO changes also include provision for the minimum floor area of a letting room occupied by a single adult to be 6.51 metres squared and 10.22 metres squared for two adults sharing.

Higher priced mortgage and product fees – Mortgage lenders often price HMO mortgages higher than a standard buy to let mortgage. This is due to mortgage lenders basing most decisions on the potential risks involved – with more tenants occupying the same property there is a higher chance that something could go wrong e.g. a tenant refuses to pay, rental voids or damage to the property.

HMO definition

The term House in Multiple Occupation refers to a rental property which falls into one of the following criteria:

  • A house which is split into bedsits
  • A house, or flatshare, where each of your tenants has their own tenancy agreement
  • Students who live in shared accommodation

Visit for more information on what properties would constitute as a HMO.

Here to help

Contact our whole of market Mortgage Brokers to find out the best rates for HMO mortgages available to you:

Call us on 01702 538 800 or arrange a call back.

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