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HMO mortgages

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What is an HMO?

A kitchen with 5 young adults doing various things, some related to food preparation, some simply reading or chatting. This is showing a student household with a shared common area

The term HMO is commonly used in property investment to describe a house in multiple occupation. This is a residential property that is rented to multiple tenants from different households, for example, a student let. 

HMO properties provide great investment opportunities for landlords because higher returns are possible from multiple tenants. However, this also makes them a greater risk, so it can be more difficult to secure a mortgage for this type of buy-to-let, compared to a standard single tenancy property.

HMO properties could include any of the following building types, but it’s how you intend to let them to tenants that determines whether you will need a traditional buy-to-let or an HMO buy-to-let mortgage:

  • Bedsits 

  • House shares

  • Private halls of residence

  • Self-contained flats

  • Cluster Flats

  • Hostels

  • On-site business accommodation for employees 

In order to be classed as a HMO tenancy, however, the property would need to be let to three or more tenants from different households or families on separate tenancies. There also needs to be an element of shared facilities between tenants, for example, kitchen, bathroom, lounge, or similar communal provisions.

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How do HMO mortgages work?

An HMO mortgage is a specific type of buy-to-let product that is specifically for the purchase of HMO properties. Not all lenders are happy to offer buy-to-let mortgages on an HMO basis, however, because, although the total income potential is higher, there’s a greater risk involved - especially for larger HMO properties that require a licence. 

Another difference is that the interest rates on HMO mortgages are often linked to SONIA (Sterling Overnight Index Average), rather than the Bank of England base rate. This is typically more expensive than other interest rate types.

HMO friendly lenders often have quite extensive criteria for HMO lending when compared to standard buy-to-let mortgage criteria. These criteria also vary widely from one lender to another, because some prefer certain types of property or tenant over another. 

It’s a good idea to speak to a broker to find a lender that meets your specific HMO needs, as they are not always easy to locate independently.

HMO mortgage criteria

To get a mortgage for an HMO property you’ll need to meet the typical criteria for a buy-to-let mortgage, such as having a 25% deposit, generating a rental income of 125-145%, as well as any income requirements and age limits. 

Those lenders willing to accept buy-to-let mortgage applications for HMO property purchase have wide and varied criteria that you are also likely to need to meet in addition to the above.

The below are some of the more commonly requested:

  • Property type - there are a few things that lenders will restrict when it comes to the type of HMO property they will accept, this could include the number of storeys, the total number of rooms, the number of bedrooms or the number of kitchens and/or bathrooms per property

  • Property location - depending on the type of HMO, lenders will want to see evidence of local demand, so for example, a student let nearby a university. However, it’s also important to not that certain local authorities restrict the number of HMO properties in any given area and the lender will want to ensure that your purchase does not exceed these limits too

  • Tenant type - some lenders prefer properties to be let out to working professionals over students or those receiving benefits, whereas some are less concerned about this so long as the potential income value is high

  • Landlord experience - most lenders prefer the those taking on a HMO property already have experience as a buy-to-let landlord, although it is possible to buy one as a first time landlord - this will be more challenging

  • Professional letting management - some lenders will insist that HMO properties are managed by a professional letting agency rather than independently by the landlord. This is likely to be essential for first time landlords

  • Licensed property restrictions - some HMO properties require a licence from the local authority, depending on the number of rooms/tenants, and not all lenders are happy to provide a mortgage for this type of property (known as a large HMO)

Types of HMO mortgage

There are not really different types of HMO mortgage, simply lenders that will only accept certain types of HMO property. Some lenders accept only standard HMOs, whereas others will also consider large HMO properties. 

Below we will look at the differences between the two types of HMO property:


A House in Multiple Occupation (HMO) is a property let out to more than three tenants from different households. Tenants typically have their own private bedrooms but share some aspects of the facilities in the property, such as the kitchen, bathroom and/or lounge.

Large HMO

A property classed as a large HMO has the same definition, however, there needs to be five or more tenants from different households, rather than three.

The major difference between a regular HMO and a large HMO property is that a large HMO requires a licence from the local authority. However, to further complicate things, some local authorities require a licence even where the HMO property does not class as a large HMO.

What is an HMO licence?

If a property requires an HMO licence, it’s possible to get an unlimited fine if you rent it out without one. 

If you have multiple properties that require this type of licence, each property must have one individually, and this will need to be renewed every five years (three years in Scotland). 

Council’s vary depending on their view of HMO properties, but some licences will include conditions, such as limiting the number of rooms, or improving the quality of shared facilities. It’s also fairly common for licences to be rejected.

Which lenders offer HMO mortgages?

Although investing in HMO properties has increased in popularity in recent years, there are still far fewer lenders offering buy-to-let mortgages for this purpose than for standard property rentals. 

As there are fewer lenders and the criteria can be quite extensive, it’s a good idea to use a mortgage broker if you’re looking for a mortgage to buy an HMO property. 

What mortgage rates can you get for a HMO mortgage?

Due to the fact that this is quite a niche area of lending, there is less competition between lenders and therefore, interest rates tend to be higher for HMO mortgages. Interest rates based on SONIA also tend to be higher than those based on the Bank of England base rate.