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HMO mortgages

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The FCA does not regulate mortgages on commercial or investment buy-to-let properties.

Last updated
July 15th, 2024
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

What is an HMO?

HMO mortgages are a type of buy-to-let mortgage that is used to buy property that will be rented to multiple tenants from different households - otherwise known as HMO properties.

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

How do HMO mortgages work?

An HMO mortgage works like a traditional buy-to-let mortgage, but not all lenders are happy to offer buy-to-let mortgages on an HMO basis and there are a few key differences:

  • All large HMO properties and some standard HMO properties require a licence before HMO mortgage lenders will approve a mortgage

  • HMO mortgage rates are often linked to SONIA (Sterling Overnight Index Average), rather than the Bank of England base rate. This is typically more expensive as it's purely for commercial use

  • There is more extensive criteria for HMO lending when compared to standard buy-to-let mortgage criteria. The criteria also vary widely from one lender to another, as some prefer certain types of property or tenant over another

Which properties need an HMO mortgage?

Any of the following building types could be considered HMO - which you may also hear referred to as a multi-let. However, it’s how you intend to let them to tenants that determines whether you'll 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 

To be classed as a HMO tenancy, the property needs 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. For example, the kitchen, bathroom, lounge, or similar communal provisions are shared between tenants.

HMO mortgage criteria

Property type

Lenders may restrict 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, for example, a student let nearby a university

Tenant type

Some lenders prefer properties to be let out to working professionals over students or those in receipt of benefits, others are less concerned so long as the potential rental yield (income) is high

Landlord experience

Most lenders prefer those taking on an HMO property to have experience as a buy-to-let landlord. It's possible as a first time landlord, but will be more challenging

Professional letting management

Some lenders will insist that HMO properties are managed by a professional letting agency rather than by the landlord independently - particularly for first time landlords

Licensed property restrictions

HMO properties often require a licence from the local authority. This is essential for large HMOs, and not all lenders are happy to provide a mortgage for this type of property

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.


A House in or of 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 large HMO shares the same definition, but has five or more tenants from different households, rather than three.

The major difference is that all large HMOs require a licence from the local authority. However, to further complicate things, some local authorities require a licence for standard HMOs too - so be sure to check.

If your property is larger than five bedrooms, you may need to look at commercial finance instead as this tends to be the cut-off point for many HMO lenders.

What is an HMO licence?

You can get an unlimited fine if you rent out an HMO without a licenses that's required. 

If multiple properties in your portfolio require this type of licence, each must have one - which will need to be renewed every five years (three in Scotland). 

Some licences include conditions, such as limiting the number of rooms, or improving the quality of shared facilities, depending on the local authority. It’s also fairly common for licences to be rejected.

Which lenders offer HMO mortgages?

There are still far fewer lenders offering HMO buy-to-let mortgages than standard ones. That said, over 800 products are available from lenders such as Santander and Lloyds, as well as many building societies and specialist lenders.

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?

As HMO mortgage are quite niche, there is less competition between lenders and therefore, interest rates tend to be higher.

Interest rates based on SONIA also tend to be higher than those based on the Bank of England base rate.

To find out what mortgage rate you can get, it's best to speak to a mortgage broker like Mojo Mortgages.

Kellie Steedquotation mark
As with any other mortgage, the best HMO mortgage rates are typically available to those with the largest deposit, and that pose lowest risk to the lender.
Kellie Steed, Mortgage Content Writer

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What is the difference between an HMO and a buy-to-let mortgage?

An HMO mortgage is a type of buy-to-let mortgage used for a specific type of property. Traditional buy-to-let mortgages do not allow for a property to be let under multiple tenancies, whereas by opting for an HMO buy-to-let you’re ensuring that you can do so. 

Not all lenders are happy to incorporate multiple tenancies into one mortgage arrangement and the process can be longer and more complicated than a traditional buy-to-let purchase.

What are the tax implications for an HMO borrower?

The tax implications will vary depending on whether you intend to buy as an individual, through a limited company, or via a Special Purpose Vehicle (SPV).

Either way, this is an income generating investment, so you'll need to pay tax on the income gained from rentals, and capital gains tax on profits made from the resale of HMO properties. 

It’s advisable to talk to an independent property tax adviser for guidance, as how you choose to structure your business will impact the amount and type of tax you're liable for.

How much can I borrow on a HMO mortgage?

Like traditional buy-to-lets, you can typically borrow around 75% loan to value (LTV), but some lenders may go as high as 80% LTV. However, to get a higher LTV loan, you will likely need HMO landlord experience and potentially need to meet other additional criteria, such as a higher EPC rating.

As it's a buy-to-let, the loan will be based on the potential rental yield of the property, rather than your personal affordability - although this will usually also be considered.

About the author

Kellie Steed
Kellie has a wealth of content writing experience, however, in 2020 took a vested interest in the mortgage industry, and chose to specialise in this area exclusively. Her personal goal is to author the most comprehensive and helpful online guide available for each mortgage type, as well as every customer need, no matter how niche.


The FCA does not regulate mortgages on commercial or investment buy-to-let properties.

Uswitch makes introductions to Mojo Mortgages to provide mortgage solutions. Uswitch and Mojo Mortgages are part of the same group of companies. Uswitch Limited is authorised and regulated by the Financial Conduct Authority (FCA) under firm reference number 312850. You can check this on the Financial Services Register by visiting the FCA website. Uswitch Limited is registered in England and Wales (Company No 03612689) The Cooperage, 5 Copper Row, London SE1 2LH. Mojo Mortgages is a trading style of Life's Great Limited which is registered in England and Wales (06246376). Mojo are authorised and regulated by the Financial Conduct Authority and are on the Financial Services Register (478215) Mojo’s registered office is The Cooperage, 5 Copper Row, London, SE1 2LH. To contact Mojo by phone, please call 0333 123 0012.