An HMO mortgage is a form of financing aimed at properties where multiple, unrelated tenants each hold a separate tenancy agreement. Lenders recognise that these properties function differently to conventional rentals and tailor their requirements accordingly.

Unlike a standard buy-to-let, an HMO mortgage caters specifically to properties with multiple occupants who each have individual tenancy agreements. This often entails additional regulations and stricter lending criteria, reflecting the more complex nature of managing multiple tenants.

In many areas, properties occupied by multiple unrelated tenants require an HMO licence from the local council. Licence rules vary depending on where you live, but they typically ensure the property meets specific health and safety standards.

Some lenders expect a larger deposit for an HMO compared to a standard buy-to-let, often around 25% or more. This helps mitigate the increased risk associated with housing multiple tenants.

Interest rates for HMO mortgages can be higher, reflecting the extra complexity of managing several tenancies. However, lenders’ offers vary, so it’s still worth comparing rates to find the most competitive deal.

Lenders typically examine your experience as a landlord, how well the property meets HMO standards, and the projected rental income. They also assess factors like rental demand in the local area and whether the property requires a valid HMO licence.

It is recommended that you only work with one mortgage broker at a time when making mortgage applications to prevent lenders from receiving multiple applications from different brokers for the same owner/property. This makes the lender see the owner as “credit hungry”, making it more likely for an application to be rejected.