An HMO mortgage is the mortgage needed to either buy an HMO, or what you’ll need to swap your mortgage to if you want to convert your property and rent it out. HMO mortgages will also be needed if you want to remortgage or refinance your HMO mortgage to get better HMO mortgage rates or release equity (to make improvements or buy another property).

HMO mortgages are specifically designed for HMOs, since there are unique challenges and benefits of lending to multiple tenants under a single household. For example, the fact that each room can be rented out individually means that even if one tenant leaves, you still have rental income from the others, so potentially losses may be reduced in the long run.

Unique lending options

HMO mortgage lenders tend to understand these unique challenges and benefits, which helps you get more favourable interest rates overall. Otherwise, you’ll want to turn to specialist HMO mortgage brokers to help you put together an application that appeals to lenders, so you get as many offers as possible and can make an informed decision about your mortgage.

Higher rental yields

While HMOs are harder to apply for (while the general rule of thumb is you only need a license for five tenants or more, this is not always the case) they do tend to bring in higher rental yields.

HMOs do tend to come with more challenges as a landlord. As a result, the lending criteria for a mortgage HMO lender may be different. For example, lenders may not offer you a mortgage unless:

1. You have experience as a landlord
2. You’ve put together rental yield calculations
3. You already have an HMO license from the local council
4. Your rental coverage ratio is high, for example 150% of your mortgage payments, to cover tenancy gaps

The property you want to buy must also meet this criteria for an HMO mortgage:

• Minimum room size requirements
• Adequate fire safety measures
• Minimum bathroom and kitchen space for tenancy size

HMO mortgage rates tend to be higher than other individual mortgage options. This is because even the best HMO mortgage rates are commercial rates, not individual rates. Your HMO buy to let mortgage interest rates are also more likely to be tied to what’s known as the Sterling Overnight Index Average (SONIA), rather than the base rate set by the Bank of England.

That’s why it’s so important to have specialist HMO mortgage brokers help you. Not only can we help put together your mortgage application and guide you through what you need to put together for your mortgage application, but we can also collect offers from multiple lenders.

As independent HMO mortgage brokers work with over 300 different lenders, so we can put multiple offers in front of you. This way you can see the offers that most appeal to you and your goals right off the bat, and get the ball rolling on securing your very own HMO property.