If you’re looking to maximise rental income and tap into the growing demand for shared accommodation, a House in Multiple Occupation (HMO) could be a strong investment choice. But financing one isn’t as straightforward as a standard buy-to-let—it requires a specialist HMO mortgage.
What Is an HMO?
An HMO is a property rented out by three or more unrelated tenants who share common areas like the kitchen, bathroom, or living room. Common examples include:
- Student accommodation
- Professional house shares
- Multi-tenanted rental properties in urban areas
If the property is rented to five or more tenants from more than one household, it’s classed as a large HMO and will legally require a licence from the local council.
What Is an HMO Mortgage?
An HMO mortgage is specifically designed for landlords purchasing or remortgaging a property intended for multiple tenants on separate tenancy agreements. These mortgages differ from standard buy-to-let mortgages in several key ways:
Lender Criteria
Lenders will often assess:
- The number of lettable rooms – Some lenders cap this at 5 or 6, while others will go higher.
- Property layout – Is it suitable for multiple occupancies? Are there enough bathrooms, fire doors, or communal space?
- Licensing – Is the property licensed or will it need to be? Some lenders require proof before proceeding.
- Your experience – Many lenders prefer landlords with at least one or two years of BTL experience, though a few accept first-time landlords with strong applications.
Key Differences and Requirements
- Higher Deposits – Most HMO lenders require a deposit of 25–40% of the property’s value.
- Stricter Stress Testing – Rental income will be assessed against a higher stress rate to account for perceived risk.
- Higher Interest Rates – Expect to pay slightly more than a traditional buy-to-let mortgage.
- Fewer Lenders – Not all lenders offer HMO products, especially for large or unlicensed HMOs.
- Legal and Safety Compliance – Fire doors, alarms, emergency lighting, and proper room sizes may be essential.
Why Use a Specialist Broker?
HMO mortgage applications are more complex, and criteria vary significantly between lenders. A specialist mortgage broker can:
- Match you with lenders who understand HMO investments
- Help you navigate licensing, legal, and regulatory issues
- Access exclusive or semi-exclusive rates not available directly
- Support you in presenting a strong case, especially if you’re new to HMO investing
Final Thought
Investing in an HMO can be a great way to increase rental yields and long-term profits—but only if it’s done correctly. Financing is a major part of that equation. Whether you’re a first-time landlord or an experienced investor expanding your portfolio, make sure your mortgage advice comes from someone who understands the HMO landscape.
Need help finding the right HMO mortgage? Get in touch with a broker who can guide you through the process from start to finish.
Emily's Mortgage Services LTD 