Professional HMO Mortgage solutions for you
If you are a property investor, an HMO property can offer high returns.
When it comes to getting an HMO mortgage, you want an experienced and honest independent mortgage broker who knows what they are doing.
At Barr Financial, we’ll always tell you the things you need to know upfront and help you every step of the way.
Do you have a HMO question?
If you have a question about an HMO or a HMO mortgage that is not covered here, please contact us.
What is an HMO property?
An HMO property is a house of multiple occupation. There are two types; an HMO Property and a Large HMO Property.
A property is classified as an HMO Property if both apply:
1) At least three tenants live at the property forming more than one household. A household can include a single person or members of the same family who live together.
2) You share the kitchen, bathroom or toilet facilities.
A property is classified as a Large HMO Property if all of these apply:
1) At least five tenants live at the property forming more than one household. A household can include a single person or members of the same family who live together.
2) You share the kitchen, bathroom or toilet facilities.
3) The property is at least three stories.
Do I need an HMO licence?
Yes and potentially yes!
There are two types of HMO Property, and the rules around licences vary:
An HMO Property:
An HMO property may or may not need a licence depending on your area.
Check with your local authority to see if its required and how much it will cost.
A Large HMO Property:
If you have a ‘Large HMO Property’ in England and Wales, then you will need a licence. Again speak to your local authority to obtain this.
A licence is valid for a maximum of 5 years and applies to each property you own. There are conditions which you have to fulfil, but if you disagree with any of them you have to appeal to the First-Tier Tribunal. To get a licence the following conditons need to be met:
1. The household must be suitable for the number of occupants. So the size of the bedrooms, living space, bathrooms and kitchen facilities all need to be appropriate for the number of tenants.
2. A fit and proper test is applied to the person responsible for running the HMO, which will either be you or a managing agent. Criminal convictions, breach of landlord laws or code of practice are examples of things a council will consider if someone is fit and proper.
3. An annual gas safety certificate must be sent to the local authority each year.
4. Gas and fire alarms must be installed and maintained.
5. All electrical appliances need safety certificates, and these must be provided to the council if and when requested.
6. The local authority may also have other stipulations and requirements.
If you run an unlicenced HMO property, the fine is unlimited!
How much can I borrow on an HMO Mortgage
The amount of rent a property gets is the main factor determining the size of the mortgage.
However, every lender looks at many other factors, including individual circumstances which can all have an impact on what is possible!
HMO Mortgage calculators
Please take a look at our HMO mortgage calculators below. They provide a good indication of what is possible. However, every lender has different rules and if you want to be even more accurate, get in touch and speak to one of our experienced HMO mortgage brokers who will be able to look into things in more detail.
HMO mortgage experience
Our independent mortgage brokers have vast experience in helping property investors secure HMO mortgages. With clients throughout the UK and with various property portfolio sizes, we can manage and support all of these people achieve their aims. Our portfolio landlords are often the clients we have the closest relationship as we are usually working with them on a very regularl basis, which means we build up a strong professional relationship.
What is the criteria for HMO Mortgages?
HMO mortgage lenders will assess you as much as the property you are looking to buy or remortgage.
It’s essential to be aware that every lender is different, have different rules, and the rules change! However, to give you a flavour and an overview of the typical things a lender will look at are:
You need your own home
Technically this isn’t always the case, and there are sometimes exceptions to this rule. However, as a ‘general rule’, you do need to be a homeowner.
Examples where you don’t need to be, might include an experienced property investor who happens to live with family or in rented accommodation. Also, some people work in tied accommodation such as the armed forces. Some exemptions can apply depending on the lender.
If you are not a homeowner, and the above examples do not fit your circumstances, you could go on an HMO mortgage with someone who is a homeowner.
You don’t need to be an experienced landlord.
Some lenders are comfortable with you being an HMO property investor for the first time, but you might need to be a homeowner (see point above).
Minimum age for an HMO mortgage
Most lenders have a minimum age of 21 or 25. Lending rules can change and don’t forget; every lender is different! To find out the latest criteria, get in touch and ask us a question.
If the age is a barrier (similar to the above point), you could look to do an HMO mortgage with someone more experienced and older. Lenders are sometimes okay with this, but again, it is essential to research the market thoroughly, and we advise getting in touch with a member of our team.
The rental figure on a HMO mortgage is crucial
The amount you can borrow will primarily be dependent on the rental the property will achieve.
Please take a look at our useful HMO mortgage calculator tool to get an idea. You’ll find it a little further down the page.
For an accurate indication, don’t forget to get in touch. Remember, every lender is slightly different, and you may be able to borrow more than you thought!
Clever ways to structure an HMO mortgage
An HMO mortgage can be in single or joint names. However, it is also possible to get an HMO mortgage through limited companies or Limited liability partnerships (LLP’s).
Usually, this is for tax planning, or a particular business structure is required. If you are not sure how best to structure your business going forward, we advise that you seek out professional tax advice.
As independent mortgage brokers with experience in HMO mortgages, we know our market well. However, we are not tax advisors. If requested, we can suggest several contacts that we have.
Maximum age for HMO mortgage
Some lenders have a maximum age at which you can apply for an HMO mortgage and usually a period by which it must end. Always check with one of our independent mortgage brokers who will be able to guide you as lending rules can change.
Lending criteria is different for every lender. Things also change over time! But we hope this gives you a flavour of what an HMO mortgage lender is considering!
To get your bespoke circumstances considered, we always advise speaking to one of our experienced independent mortgage brokers to help establish your options.
Can I get a day one remortgage on an HMO property?
The short answer is yes.
Buying at Auction
It is helpful if you have bought a property at auction with either cash or bridging finance and you want to either repay the bridging loan or pull out the money that you have used by way of a remortgage. It is particularly helpful if you are wanting to expand your portfolio by leveraging yourself and maintaining a stronger cash position so you can move on future opportunities.
It is also beneficial in a scenario where you purchase a property which was not initially mortgageable to an HMO lender, as it may have needed some work. In these scenarios, people either use cash to purchase or use some form of short term finance.
Either way, they want to complete the job as quickly as possible, remortgage to either pay off the short term finance or recoup their cash and then rent the property out.
To do this, usually, they have to wait at least six months before they can remortgage, however now they don’t. It helps them to recoup their cash quickly to enable them to move on to the next deal or pay off the more expensive short term finance faster.
HMO Minimum Rent Calculator
HMO Mortgage Calculator
HMO Repayment Calculator
HMO Mortgage Guides
Service that’s about smiles not sales
We may be mortgage brokers, but we’re not a bunch of bankers! We are independent which means we only work for you. Our team are incentivised not on sales, but providing the best service for you.
- We assess
- You instruct us
- We research
- We find the best deal for you
Agreement In Principle
- You agree to the deal
- We submit the first stage of your application
- You get an agreement in principle
- We submit the second stage of your application
- We present your application in the best possible manner
- They assess your situation
- We support you throughout the process
- They assess your property
- You receive your mortgage offer
- Technically our job is done but we also like to help
- We liaise with solicitors and estate agents
- We keep you updated
- You achieve your goals