Can You Get a Mortgage with an HMO Licence?

An HMO (House in Multiple Occupation) is a great way to maximise rental income by letting to multiple tenants under one roof and can offer high rental yields and flexible income streams compared to more standard buy-to-let mortgage properties.

But what is an HMO mortgage and how does it work?

HMO mortgages are specifically designed to help landlords finance properties rented to multiple tenants, but they often come with higher deposits, extra paperwork, and stricter lending rules. If you’re a first-time landlord, then there’s a lot of information to cover to help you avoid making mistakes that could slow down your purchase or risk non-compliance with an HMO licence.

In this article, we cover everything you need to know about securing an HMO mortgage in the UK, from understanding the HMO licence to exploring the different mortgage options available. By the end, you’ll have everything you need to know how to navigate the HMO mortgage process with ease. Let’s jump in.

 

What Are HMO Mortgages and How Do They Work?

An HMO mortgage is a specific loan that is designed for landlords who want to purchase and manage properties that are rented to multiple tenants who are not part of the same household. Unlike a standard buy-to-let mortgage, an HMO mortgage is slightly more complex because lenders consider these properties higher-risk.

With multiple tenants living in the same property and often facilities, such as shared kitchens, bathrooms, and other facilities, there are simply more variables to manage, from potential wear and tear to tenancy turnover. As such, lenders will generally require additional proof, apply stricter criteria, and demand a larger initial deposit compared to a standard buy-to-let mortgage.

How Do HMO Mortgages Work?

A HMO mortgage is like a specialised variation of a buy-to-let mortgage. Unlike a standard buy-to-let mortgage, which assumes a single tenant or family, HMO mortgages take into account the increased number of occupants, shared facilities, and higher management responsibilities.

As a result, lenders will view HMO mortgages with an increased risk from a standard buy-to-let loan. This is because an HMO property will typically house multiple tenants, from different households, which increases the risk of property damage, rent arrears, and tenancy turnover.

When considering financing options, it’s helpful to compare a standard buy-to-let mortgage with an HMO mortgage to understand the key differences.

 

Key Differences Between Buy-to-Let and HMO Mortgages
Feature Standard Buy-to-Let Mortgage HMO Mortgage
Deposit Requirement Typically 15–25% of property value Often higher, around 25–40% of property value
Interest Rates Usually lower due to lower perceived risk Slightly higher due to increased risk from multiple tenants
Lender Criteria Focus on credit history, income, and property suitability Focus on safety compliance, landlord experience, and property suitability for multiple tenants

 

It’s crucial to note that most lenders will require a valid HMO licence before approving a mortgage, as this confirms the property meets safety and management standards.

A small number of specialist lenders may consider applications while a licence is pending, but this usually involves stricter criteria and higher deposits. For most landlords, securing the licence first is the simplest and safest approach when applying for an HMO mortgage.

 

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What is An HMO Licence and Why Do You Need One?

In the UK, a HMO licence is a legal requirement if you want to rent out a house with multiple tenants. This typically means a property that is shared by three or more tenants from different households, all who share facilities such as a bathroom or kitchen.

A HMO licence is granted by the council, local to the property, and confirms that the building meets health, safety, and management standards. Operating without a valid HMO licence can carry significant legal consequences. Landlords may face substantial fines, a criminal record, and could be prohibited from letting the property altogether. These measures exist to protect tenants and ensure that HMO properties are managed safely and responsibly.

Why Is An HMO Licence Important?

A HMO licence is important because it ensures that the property/properties that are rented to multiple tenants meet strict property standards. Councils use the licence to check that landlords are providing secure and well-maintained accommodation. In order to secure a mortgage for an HMO property, having a valid licence is often essential to qualify for an HMO mortgage and to access competitive HMO mortgage rates.

A valid HMO licence:

  • Verifies Safety Compliance: Confirms the property meets fire, gas, and electrical safety standards to protect tenants.
  • Confirms Adequate Facilities: Ensures there are enough rooms and shared facilities for the number of tenants.
  • Checks Landlord Suitability: Demonstrates that the landlord is a “fit and proper” person to manage the HMO responsibly.
  • Ensures Legal Compliance: Guarantees adherence to local council regulations, helping landlords avoid fines or legal action.
  • Supports Mortgage Applications: Gives lenders confidence when assessing finance, often impacting available HMO mortgage rates.

Ultimately, holding a licence is a legal requirement that helps protect tenants and strengthens your position with mortgage lenders.

If you’re thinking about getting an HMO mortgage or just want to understand your options, Boon Brokers can help you. As a fee-free, whole-of-market mortgage broker, our dedicated mortgage advisers can provide you with clear, personalised advice for both first-time landlords and experienced investors.

 

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Can You Get a Mortgage on a Property That Requires a HMO Licence in the UK?

Investing in an HMO can unlock higher rental income and more flexible tenancy arrangements. To secure a mortgage for HMO property, however, having the correct HMO property licensing is essential. A valid licence shows lenders that the property meets safety and management standards, giving them confidence that the investment is secure.

Lenders will typically check that your HMO:

  • Holds a valid HMO licence.
  • Meets all safety and management requirements, including fire and electrical safety.
  • Provides enough rooms and facilities for the number of tenants.

A property without proper licensing can make getting a mortgage more difficult. Lenders are cautious about HMO licenced property because multiple tenants increase potential risks and management responsibilities. Fully licenced properties reduce the chance of delays or refusals, making it easier to access suitable finance.

Financing a licenced HMO differs from a standard buy-to-let. HMO mortgages are often treated as specialist products, meaning deposits may be higher and HMO mortgage rates can differ. Understanding these differences early helps landlords plan effectively and avoid surprises during the application process.

If you’re unsure whether your property meets licensing requirements or want guidance on securing a mortgage for HMO property, Boon Brokers can help. We provide expert, fee-free advice, helping both first-time landlords and experienced investors navigate the HMO mortgage process with confidence.

With a valid HMO licence in place, you can access the right mortgage options and move forward confidently, which leads naturally into exploring what HMO mortgages are and how they work.

What Do Lenders Check When You Apply for an HMO Mortgage?

Lenders will need to check a variety of factors when you apply for an HMO mortgage in order to make sure both the property – and you as a landlord – meet their requirements. Ultimately, lenders need to ascertain a degree of confidence that the investment is secure, the property can accommodate multiple tenants safely, and that you are prepared to manage the responsibilities involved.

While the exact criteria for an HMO mortgage will depend on your chosen lender, we’ve provided an overview below of what lenders will generally be looking to check:

  • Landlord Experience

Lenders will often prefer applicants with prior buy-to-let or HMO management experience. As a result, first-time landlords may face stricter criteria or need to demonstrate additional knowledge or proof of property management.

  • Property Value and Location

The property’s market value, rental potential, and local demand are crucial. Lenders will want to know whether the location supports multiple tenants and the potential for sustainable rental income.

  • Credit History and Affordability

A thorough credit check for mortgage applications is standard. Lenders will assess your personal and business finances to ensure you can manage repayments.

  • HMO Licence Requirements

For a HMO mortgage in the UK, it is a legal requirement to have a valid HMO licence. This demonstrates compliance with local regulations, safety standards, and proper management practices.

  • Rental Income Potential

Some lenders will also require a projected rental income to meet a certain percentage of the mortgage repayments. This is to ensure that your investment qualifies your affordability and that you can afford the mortgage repayments.

By understanding your lender’s requirements, you can gather the right documents, highlight your experience as a landlord, and make sure your property meets all necessary standards.

At Boon Brokers, our dedicated mortgage experts can help you prepare for your mortgage – completely fee-free. With whole-of-market access, our dedicated mortgage advisers will compare products from both leading and specialist lenders to find you the HMO mortgage that best suits your needs.

Can You Use a Standard Buy-to-Let Mortgage for an HMO?

No, you cannot use a standard buy-to-let mortgage for an HMO property. As we highlighted at the start of this article, while both products are designed for rental properties, HMOs specifically involve multiple tenants on separate agreements, which means lenders will have different criteria and restrictions, generally treating them as a higher risk loan.

In short: once your property requires a mandatory HMO licensing, you will almost always need a specific type of mortgage for HMO.

Using the wrong type of mortgage for your HMO property can have serious repercussions. In the case that your lender discovers the property is operating as an HMO, without the right finance in place, you will likely be breaching your mortgage terms and could face heavy financial penalties. As such, the safest option is always to speak to a trusted mortgage broker first.

At Boon Brokers, our dedicated mortgage advisers have a wealth of experience in HMO mortgages and can help match you with the correct mortgage lenders for HMOs that offer the most competitive HMO mortgage rates.

How Do You Get Approved for an HMO Mortgage?

Getting approved for an HMO mortgage will depend on your chosen lender, as each lender will set their own criteria. There is no one-size fits all with lenders. Some may place greater weight on landlord experience, while others focus more on the property’s rental potential or licensing. However, what every lender has in common – and is crucial to understand – is that you will need to prove that the loan and investment is safe and manageable.

That said, lenders will generally center a focus on a few key factors. Knowing what these are, and how they could impact your application, can help you improve your application for an improved chance of approval:

  • Landlord Experience

Many leading lenders will prefer applicants who already have a portfolio of buy-to-let experience. Naturally, this will demonstrate that you understand tenancy management and rental obligations. Of course, first-time landlords can still qualify, however, you may need to provide stronger financial evidence or a larger deposit to offset any perceived risk.

  • Valid HMO Licence

For a HMO mortgage, a valid licence will be required. This documentation will prove that the property meets legal safety, space, and management standards. Without a valid HMO licence, many lenders will reject your application, while a few specialists may accept pending licences under stricter terms.

  • Deposit Size

Deposits for HMOs will be typically higher than standard buy-to-let, often ranging from 25 – 40% of the property’s value. Just with any loan-to-value ratio, the more you can put forward in advance, the stronger your application will be. Most notably. a larger deposit could help unlock access to more competitive products and lower HMO mortgage rates.

  • Rental Income Assessment

Lenders calculate expected income based on the number of tenants, projected rents, and local market conditions. The main point of this assessment is to ensure that the agreed mortgage payments can be comfortably covered and that there’s a financial cushion in case of vacant rooms or late rent payments.

  • Credit History

A good credit record can help demonstrate your financial reliability. Lenders may be wary of approving HMO mortgages if you have recently missed payments, defaults, or CCJs, as these raise concerns about your ability to manage a higher-risk property.

Understanding and working through each of these steps methodically can help increase your chances of securing an HMO mortgage. At Boon Brokers, our expert advisers handle your application from start-to-finish, by identifying suitable lenders, ensuring your documentation meets your chosen lender’s requirements, and presenting your case in the strongest possible way to maximise your chances of approval.

Which Lenders Offer HMO Mortgages?

Not every mortgage lender will offer an HMO-specific product. While both high-street and specialist lenders can provide HMO mortgages, popular high-street lenders often have limited products or higher rates due to the additional regulations, safety requirements, and perceived risks of managing multiple tenants.

Choosing the best HMO mortgage lenders will depend on your personal circumstances. However, it’s important to compare rates and deals across a range of HMO lenders to make sure you secure a competitive product.

Below we have provided a top 5 selection of leading UK lenders that currently offer competitive HMO mortgages. These include:

When searching for your perfect lender, working with a whole-of-market mortgage broker can help you focus on lenders that best suit your HMO needs. At Boon Brokers, our dedicated mortgage advisers can guide you through every step of the application, using our network of lenders we work with to find the most appropriate options and help you secure competitive HMO mortgage rates.

 

 

Frequently Asked Questions

What’s the Difference Between Buy-to-Let and HMO?

A buy-to-let mortgage is typically for a single tenancy, such as a family renting a property. HMOs rent to multiple tenants, often sharing facilities. They can generate higher rental income but come with stricter lending rules, larger deposits, and licensing requirements.

What Are the Types of HMO Mortgages?

HMO mortgages usually fall into two main types: smaller HMO mortgages for properties with a few tenants, and larger or portfolio HMO mortgages for multiple-bedroom properties or landlords managing several HMOs. Specialist lenders often provide tailored products depending on size and complexity.

Are There Any Hidden Fees for HMO Mortgages?

Most HMO mortgages are straightforward, but additional costs may include valuation fees, arrangement fees, or higher legal costs because of licensing and tenancy requirements. A mortgage broker can help clarify all fees upfront to ensure there are no unexpected charges during the process.

Am I Allowed to Convert a Property Into an HMO?

Converting a property into an HMO requires approval from your local council and usually an HMO licence. You must meet safety, space, and amenity standards. Checking with your local authority first ensures you comply with regulations before starting any work.

Can I Get an HMO Mortgage Through a Limited Company?

Yes, many landlords purchase HMOs through a limited company, which can offer tax benefits and limited liability. Lender criteria can vary, so specialist lenders are often required. Using a broker can help identify suitable lenders and simplify the application process.

Do I Need a Mortgage Broker to Get an HMO Mortgage?

With stricter lending criteria, higher deposits, and additional licensing requirements, HMO mortgages can be more complex to understand and navigate than that of a standard or buy-to-let mortgage. Fortunately, a trusted mortgage broker can simplify the entire process for you, guiding you through the rules, regulations, and application from start-to-finish.

At Boon Brokers, we are a trusted and proven whole-of-market mortgage broker, offering a fee-free service that can help secure the mortgage that matches your needs. We work with a wide range of lenders, including both high-street and specialist providers, to ensure you have access to the most suitable products and competitive HMO mortgage rates.

Our dedicated mortgage advisers have extensive experience helping landlords of all levels, from first-time HMO investors to portfolio landlords. We’re here to help you with every detail – from documentation to licensing requirements – providing professional support that gives you complete confidence throughout the process.

Contact Boon Brokers today and speak with our dedicated advisers and start your HMO mortgage journey with expert guidance and personalised support.

 

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    Boon Brokers Team

    Jay BlackabyCeMAP

    Jay Blackaby is a CeMAP-qualified mortgage and insurance adviser with over eight years of financial service industry experience. Bringing a wealth of knowledge to each case and client, Jay specialises in supporting residential mortgages, remortgages, and buy-to-let properties.