HMO Mortgages

Houses in Multiple Occupation (HMO) are properties rented out by three or more unrelated tenants who share communal facilities, such as a kitchen and bathroom. Investing in HMO properties can provide higher rental yields compared to standard buy-to-let properties, making them an attractive option for landlords. However, financing an HMO building requires a specialised HMO mortgage, as these properties involve different lending criteria.

At Teesside Money, we help landlords secure competitive HMO mortgages across Teesside, The North east and any UK location providing expert advice on multiple occupancy mortgage options. Whether you’re looking to buy an HMO property or refinance an existing one, we can connect you with the best HMO mortgage lenders in the market.

What Is an HMO Mortgage?

An HMO mortgage is a type of buy-to-let mortgage designed specifically for landlords purchasing or remortgaging a property that is rented to multiple tenants. Unlike a standard buy-to-let mortgage, mortgage lenders for HMOs have stricter requirements due to the higher tenant turnover and potential maintenance costs associated with these properties.

Key Features of HMO Mortgages:

• Higher rental yield potential compared to single-tenancy buy-to-let properties.
• Lenders often require a larger deposit (typically 25-40% loan-to-value).
• Specific licensing requirements apply, particularly for large HMO properties.
• Some lenders require a minimum property valuation (e.g., £100,000 outside London, £250,000 in London).
• Interest rates may be slightly higher than standard buy-to-let mortgages due to perceived risk.
• Lenders may want to see a track record of being a landlord or owning UK property.

Who Needs an HMO Mortgage?

You will need an HMO mortgage if:

• You are purchasing a property that will be rented to multiple unrelated tenants.
• You are remortgaging an existing property that has been converted into an HMO building.
• You are looking for a mortgage for an HMO investment property in Teesside, Northeast England or any UK location.
• You need a mortgage product designed for a licensed or unlicensed HMO property.

HMO Mortgage Lenders – What Do They Look For?

Lenders assess various factors before approving an HMO mortgage, including:

• Experience as a landlord: Some lenders prefer applicants with existing buy-to-let experience.
• Property location: Licensing and Government guidelines can alter depending on the area and the local authorities legislation. Some areas including most of Middlesbrough are  within the article 4 direction for HMO’s and changes if use. Please see our fact sheet for more information on this.
• Rental income potential: Lenders conduct rental stress tests to ensure the rental yield is sufficient.
• Property size and facilities: Small HMOs (3-4 tenants) may have more lender options than large HMOs (5+ tenants). Room sizes will need to meet local authority guidelines to fall within lender criteria. Failing to meet the guidelines can result in a down valuation and the surveyor not being able to include all pf the rooms in his calculation of the rental income. See attached info sheet for more information.
• Deposit requirements: Generally, a 25-40% deposit is needed.

At Teesside Money, we work with a wide range of HMO mortgage lenders to help you find the best deals for your property investment.

The Difference Between Small and Large HMO Mortgages

• Small HMO (3-4 tenants): Easier to finance, with more lender options and lower deposit requirements.
• Large HMO (5+ tenants): Requires an HMO license, has fewer lender options, and usually comes with stricter affordability criteria.

How to Get an HMO Mortgage – The Application Process

1. Assess Your Eligibility – Check if your property meets HMO mortgage lender requirements.
2. Consult an HMO Mortgage Broker – Our HMO mortgage advisors at Teesside Money can help you navigate lender criteria and find the best deal.
3. Get a Decision in Principle (DIP) – This helps you understand how much you can borrow.
4. Submit Your Application – Provide necessary documents, including proof of rental income and property details.
5. Property Valuation & Underwriting – The lender assesses the property and rental income projections.
6. Mortgage Offer & Completion – Once approved, your mortgage is finalized, and you can proceed with your HMO investment.

Why Choose Teesside Money for Your HMO Mortgage?

• Access to leading HMO mortgage lenders offering competitive rates.
• Expert advice tailored to landlords investing in HMO Teesside properties.
• Assistance with both small and large HMO mortgage applications.
• Support for first-time HMO landlords and experienced investors.
• A seamless mortgage application process with personalized guidance.

FAQs

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

An HMO mortgage is specifically designed for properties rented out to multiple tenants who are not from the same household, whereas a buy-to-let mortgage typically applies to single-tenancy rentals.

Can I get an HMO mortgage as a first-time landlord?

Some lenders require buy-to-let experience before offering an HMO mortgage, but there are options available for first-time landlords. Our advisors can help you find a suitable lender.

Do I need a license for an HMO property?

Licensing depends on the number of tenants and local council regulations. Generally, HMOs with five or more tenants require an HMO license from the local authority.

What are the typical interest rates for an HMO mortgage?

Interest rates vary depending on the lender and your financial profile. Rates can be slightly higher than standard buy-to-let mortgages due to the perceived risk.

Can I remortgage an existing property as an HMO?

Yes, if you have converted your property into an HMO, you can remortgage to an HMO-specific mortgage to secure better rates or release equity.

How much deposit do I need for an HMO mortgage?

Most HMO mortgage lenders require a 25-40% deposit, depending on the property size, location, and rental income potential.