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HMO Buy To Let Mortgage

What is a HMO Buy To Let Mortgage?

The main distinction between an HMO mortgage and a buy-to-let mortgage is the much higher yield you can anticipate from an HMO, despite the fact that maintaining a high-quality HMO requires more management and that the rent is typically all-inclusive of related expenses like water, gas and council tax.

Although the lending environment has changed recently and more lenders are willing to consider smaller HMOs based on the type of lease in place, not all buy to let lenders will offer HMO mortgages.

A section 257 HMO would be described as a block of apartments that does not fulfil building code standards and has less than two-thirds owner occupancy, however this is far less prevalent.

In recent years, the need for specialised HMO mortgages has grown along with the popularity of Houses in Multiple Occupation (HMO) properties. HMOs have gained popularity among landlords due to their potential for higher yields and monthly earnings than typical Buy to Lets. But because the HMO industry is so specialised, it's critical to comprehend the laws and guidelines before making a decision.

What is a HMO property? 

A property that is rented to numerous separate households is known as an HMO (Houses in Multiple Occupation) 

The entire structure, or even only a portion of the building, must fit into one of the following criteria for the property to qualify as an HMO.

A house or flat where more than one household shares a facility, such as a washroom, toilet, or kitchen.

This HMO form, which is the most prevalent, relates to shared housing, such as student and professional rentals.

A toilet, personal washing facilities, and cooking facilities are considered to be basic amenities. Tenants may share one or more of these amenities, or the lodging may be deficient in one or more of these amenities. 

The structure does not totally composed of independent pieces.

The building is occupied by at least three individuals who belong to multiple households.

A converted building that doesn't have self-contained apartments (and doesn't share amenities)

The following provides evidence of self-contained apartments.

Each occupant of the property is given sole use of the property's three utilities, which include a toilet, a washing machine, and a kitchen.

A section 257 HMO would be described as a block of apartments that does not fulfil building code standards and has less than two-thirds owner occupancy, however this is far less prevalent.

How will my HMO be evaluated?

The majority of HMO mortgage lenders will assess HMOs with six rooms or fewer using a building valuation (bricks and mortar valuation).

We can obtain commercial funding based on the "going concern" of your HMO rather than just the building value, allowing you to get an HMO mortgage against the income in addition to the building value if your HMO is a fully operational HMO in an article 4 area, OR a large HMO with 7 or more tenants with "Sui Generis" planning permission.


It's likely that you will need an HMO licence and consequently an HMO mortgage if your property has five or more renters, from two or more separate households, who share facilities. Your local government must be consulted about this because they will make the ultimate decision. You will require a multi-let mortgage if your HMO doesn't need a licence.

Legal Responsibilities

The legal requirements for an HMO are more extensive than those for a typical buy-to-let and include provisions for the suitability of the assets, upkeep standards, gas safety checks, electrical safety tests, planning requirements, insurance requirements and fire safety checks.

Birmingham Midshires HMO Buy To Let Mortgage Criteria

  • No maximum number of storeys
  • Maximum LTV 75%
  • No minimum bedroom size
  • Minimum property value £50,000
  • Maximum number of kitchens in the property is 1 
  • First Time Landlords accepted 
  • No HMO experience required 
  • HMO rental assessment used
  • Unlicensed HMO's are acceptable 
  • Maximum number of bedrooms is 5
  • Communal area required in the property to be considered as a HMO 
  • If a current HMO home is going to be converted into a regular house, BM Solutions may take that into consideration

What are the advantages of a HMO?

HMOs typically generate more profits than typical buy-to-let properties.

This is so that HMOs can generate numerous income streams from the separate room rentals they offer.

For instance, a three-bedroom house with a £1,400 monthly rent may be expanded and remodelled to become a six-bedroom HMO.

A total monthly rental income of £2,700 would be achieved if each room brought in £450 in rent.

HMOs have the potential to provide higher rental yields than conventional buy-to-let properties, sometimes by a factor of three.

Due to tenants looking for affordable rooms to rent, demand for shared living accommodations tends to withstand economic change and instability.

While you look for another tenant for the vacant room, you still have numerous other tenants paying their rent after one leaves out.

What are the disadvantages of a HMO?

Investors in HMOs frequently buy ordinary family houses and turn them into co-living spaces.

Since an HMO mortgage cannot be obtained until the property has been transformed, HMO investors must typically look into alternative types of bridging financing.

More rules apply to HMOs than to typical buy-to-let houses.

The greatest distinction is that while some HMOs may need planning clearance, many HMOs need a permit to be legally rented out.

HMOs are usually always completely furnished because they are rented out on a room-by-room basis.

Therefore, more money is needed up front to set up an HMO for the rental market.

Although it can vary depending on the HMO's size and location, certain HMOs need planning authorization.

Planning clearance will always be needed for a property that will house an HMO with at least seven tenants.

Smaller HMOs, housing three to six people, frequently fall under authorised development, necessitating the need of a planning permit.

An HMO will always need planning permission, regardless of its size, if the local authority has an Article 4 direction in place restricting authorised development rights.

Council Tax and HMO's

While tenants are typically responsible for paying the council tax on traditional buy-to-lets, HMO landlords occasionally pay it on their properties.

In contrast to HMOs where a group of acquaintances have moved in under the same lease, the landlord may be responsible for paying the council tax in HMOs where a single tenancy is granted for each room.

Clifford Dalluge
Clifford Dalluge

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