What is HMO?

HMO stands for House in Multiple Occupation, a type of rental property where multiple tenants occupy separate bedrooms but share common living spaces such as kitchens and bathrooms.

Purpose of HMO mortgage

The purpose of an HMO mortgage is to provide financing for the purchase or refinance of an HMO property.

An HMO mortgage is a specialized type of mortgage designed specifically for HMO properties. These mortgages often come with different terms and conditions compared to traditional buy-to-let mortgages. Some key differences include higher deposit requirements, more stringent lending criteria, and higher interest rates. Despite these differences, HMO mortgages can offer attractive returns and can be a profitable investment option for experienced landlords.

How HMO works?

HMOs are typically used as a form of affordable housing and are a popular option for students or young professionals. The owner of the HMO property is responsible for managing the property, collecting rent from tenants, and ensuring that the common spaces are maintained.

Types of tenants in HMO:

Tenants in an HMO can be individuals or groups of people who share a living space. This can include students, young professionals, and families. In some cases, HMOs may also be used to provide temporary housing for people in need, such as refugees or homeless individuals.

When do you need an HMO mortgage?

  • In the UK, if you are renting out a property to three or more tenants from two or more separate households, the property must be licensed as an HMO.
  • This means that you need to obtain an HMO license from the local council, which will include inspections and other requirements to ensure that the property meets health and safety standards.
  • If you are planning to rent out a property as an HMO, you need to make sure you have the right type of mortgage in place to finance it.

Licensing requirements

  • The licensing requirements for HMOs vary from council to council, but generally, the property must have adequate fire safety measures in place, adequate ventilation and heating, and must be well-maintained.
  • You will also need to have a fire alarm system in place, smoke detectors, and adequate emergency lighting.
  • If you do not have the right licensing in place, you may face fines and legal penalties.

Different types of mortgages for HMO

  • If you are looking to buy a property to rent out as an HMO, there are a few different types of mortgages to choose from.
  • One option is an HMO mortgage, which is specifically designed for properties that are being used as HMOs. These mortgages tend to have more flexible underwriting criteria and are designed to take into account the risks associated with HMO properties.
  • Another option is a buy-to-let mortgage, which is designed for landlords who are buying properties to rent out to individual tenants. These mortgages tend to be more restrictive and may not be suitable for HMO properties.
  • It is important to choose the right type of mortgage for your HMO property, so be sure to speak to a mortgage advisor who can help you find the right solution.

HMO Mortgage Criteria

Borrower Requirements:

  • Good credit score
  • Proof of income
  • Stable employment history

Property Requirements:

  • Minimum of 3 tenants
  • Adequate living space for tenants
  • Proper fire safety measures


  • Typically capped at 75% of the property value
Interest Only Basis:
  • HMO mortgages are often on an interest-only basis.
  • Borrowers must repay the capital amount at the end of the loan term.

Rental Income Requirements:

  • Proof of rental income from HMO tenants
  • Ability to meet mortgage repayments from rental income

Stress Tests:

  • Evaluate the borrower’s ability to repay the mortgage under stressful financial circumstances.

Affordability Assessment:

  • Lenders assess if the borrower can afford the mortgage repayments based on their financial situation.

Buy-to-Let for HMO-

Differences from conventional buy-to-let – Buy-to-let for HMO is different from conventional buy-to-let in that it is specifically designed for properties that are rented out to multiple tenants. This means that the lending criteria for HMO mortgages are typically more stringent than for conventional buy-to-let mortgages.

Strict lending criteria – HMO mortgage lenders often require borrowers to have experience managing properties that are rented out to multiple tenants. In addition, they may have more strict requirements around property condition, and the types of tenants that are allowed to occupy the property.

Importance of applying for HMO mortgage – HMO mortgages are essential for individuals looking to purchase and rent out a property to multiple tenants, as conventional buy-to-let mortgages may not be suitable for this type of property.

Risk factors – HMO properties often come with a higher level of risk for lenders, as there is more potential for property damage, tenant disputes, and other issues that can arise when multiple tenants occupy a single property.

Higher expenses – HMO properties typically have higher expenses compared to conventional buy-to-let properties, as they require additional inspections, insurance, and management costs. Borrowers should be prepared to incur these additional costs when purchasing an HMO property.

Finding an HMO Mortgage

  • Specialist lenders: There are some lenders who specialize in HMO mortgages and have a more comprehensive understanding of the sector. They may have different products, rates, and criteria specifically for HMO properties and may be able to provide more favorable terms.
  • Online comparison sites: Online comparison sites allow you to compare different mortgage options from different lenders, including HMO mortgages. You can compare interest rates, fees, and other terms and conditions to find the best deal for your situation.
  • Mortgage brokers: Mortgage brokers can help you find the best HMO mortgage for your needs by connecting you with a range of lenders and helping you navigate the application process. They have expertise in the mortgage market and can provide you with tailored advice based on your circumstances.
  • Factors to consider: When looking for an HMO mortgage, it’s important to consider your personal circumstances and the specific requirements of the property. You should compare interest rates, fees, and terms and conditions to find the best deal, but you should also consider factors such as stress tests, rental income requirements, and loan-to-value restrictions to ensure that you get a mortgage that is right for you.

HMO mortgage is a type of mortgage specifically designed for homes that house multiple tenants. HMOs typically consist of three or more tenants who share common living spaces, such as a kitchen or bathroom. HMO mortgage has specific criteria for both the borrower and the property, and the loan is usually on an interest-only basis.

Benefits and drawbacks:

One of the main benefits of HMO mortgage is the potential for higher rental income compared to traditional buy-to-let properties. However, HMO mortgage also comes with stricter lending criteria, higher expenses, and additional responsibilities for the property owner.

Final thoughts:

The demand for HMO properties in the UK is on the rise, and HMO mortgage can be a viable option for those looking to invest in this type of property. It is important to carefully consider all aspects of HMO mortgage, including the financial and management responsibilities, before making a decision. As with any type of mortgage, it is essential to do thorough research and seek advice from a mortgage broker or specialist lender.