There is no strict limit on the number of buy-to-let properties you can have in your portfolio. However, it will need to be at least four to be classed as one.
HMO mortgages and finance for Houses in Multiple Occupation
Helping you maximise returns and minimise your finance costsSpeak to one of our experts020 4525 5312
Cost effective HMO Finance
- Up to 100% Loan to Value available
- Rates from 2.3%
- £50,000 – No Maximum
- Repayment and interest only available
The Most Versatile Finance
- HMO portfolios our speciality
- Market value OR bricks and mortar value
- No Income Proof Required
- Specialist help for first time HMO landlords
All types of HMO's Finance
- Refinance existing property assets
- HMO''s without licences
- Converting properties to HMO's
- Extract cash from your current portfolio
HMO Mortgage Brokers and Lenders
Rangewell is a specialist HMO mortgage broker who actively works with the whole market range of specialist HMO mortgage lenders
HMO Financing can make a huge difference to the profitability of your business, and as your partner, Rangewell aims to save you both time and money.
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So whether you're a first time HMO landlord, an experienced HMO landlord looking to expand your portfolio or looking for a remortgage - Rangewell can help you think through and understand the range of appropriate and affordable financing available.
Why partner with Rangewell?
As your partner, we will work with you to:
- Help you understand the difference between a buy-to-let mortgage and an HMO (houses in multiple occupations) mortgage
- Review if you need an HMO mortgage (in some circumstances, a standard BTL mortgage may be available and more appropriate)
- Check your eligibility for an HMO mortgage (Our proprietary HMO mortgage calculator will identify the range of lenders willing to finance your property - allowing you to choose the correct LTV and interest rate combination that's right for your requirements)
- Identify the best lenders and the best finance rates for your specific circumstances
- Calculate and help you minimise the deposit you need for your HMO mortgage
How Rangewell can help
Rangewell can also help with complex cases such as:
- HMO mortgages and finance for first-time landlords
- Large HMO's - we have lenders with no upper limit on the number of bedrooms per property
- Finance for HMO's held in Limited Companies / SPV's and other complex structures
- Student lets designated as HMO's
- Expats and foreign nationals looking for HMO finance
- Properties operating as HMO's without planning permission (and we can refer you to specialist support to help rectify historic licencing issues)
- Capital raising from your current HMO portfolio
In almost all cases, because Rangewell are specialist HMO Mortgage Brokers, our experts will be able to identify a number of lenders suitable for your requirements and be able to offer a range of fixed and floating interest rates
Choosing the right HMO mortgage broker
Getting the right type of HMO mortgage and property can make a big difference to the levels of return you enjoy. Many experienced investors have discovered that they can increase raising the overall income earned from a property by renting rooms on an individual basis.
According to data from Mortgages for Business, you could expect the overall yield on a standard buy to let with a single household tenant to average 5.8% in the first three months of last year.
Houses in Multiple Occupation yielded an average of 10.2%.
It looks as though you might enjoy a better return on your investment by letting an HMO. But you will need a special kind of finance. Fortunately, at Rangewell, we can help you find the type of funding you need.
What is an HMO?
HMOs can provide these increased yields because they provide rent by letting individual rooms, providing multiple income streams, and higher yields overall compared with letting to a family.
Government regulation states that an HMO has at least three unrelated tenants living in a home who are sharing a toilet, bathroom or kitchen facilities. It becomes a ‘large HMO’ if it has more than five tenants and is over more than two floors.
Large HMOs automatically need a licence from the council and need to meet certain standards for fire safety. In some areas, all HMOs require a licence. You should check with your local authority.
Each bedroom will be let as a separate room and each will need a separate lock and a fire door.
Unlike a standard let, with shared occupancy and one tenancy agreement covering all the occupants, an HMO usually requires individual short-term tenancy agreements with each of the tenants.
It will also require a special kind of funding. Speak to Rangewell to find out more about HMO finance.
What are the criteria for an HMO mortgage?
All HMO mortgage lenders tend to operate differently, so their criteria may be very different. To find the most suitable HMO mortgage, a good broker will need to know the following:
1. the experience of the borrower(s)
2. Current income level of the borrower(s)
3. Credit rating of the borrower(s)
4. Basic information about the proposed HMO property, including the number of bedrooms, tenant type, property address, and a license in place.
5. The Borrowing Vehicle, whether a personal or individual name, a Limited Company or a limited liability partnership.
6. The source of the deposit, if a purchase is not a HMO remortgage.
It's essential for a lender to fully understand a borrower's situation so the lender can tailor products suitable for a specific scenario to allow for a smooth and efficient process.
HMO Mortgage Lenders
Not all lenders are keen on providing mortgages for HMOs because of what they see as an increased risk.
HMO properties are traditionally seen as unlikely to attract family renters, and as often being of poor quality, offering little security for the lender. To make matters worse, the modifications required to turn a property into an HMO, including fire doors and escape routes, individual heating and meters in each room will further detract from the resale potential.
An existing Buy to let Mortgage may have clauses preventing you from turning it into an HMO.
As a result, many investors believe that a Commercial Mortgage is needed for HMO property. At Rangewell, we know the specialist lenders who can offer competitive deals for landlords looking to purchase an HMO or convert an existing property, with an HMO Mortgage. They may be more costly than a conventional Buy to let mortgage but can cover up to 75% loan-to-value.
Do I need a licence for Houses of Multiple Occupancy (HMOs)?
Yes, you need a licence for a multiple occupancy house. This is for any HMO occupied by five or more people in two or more households, where householders share facilities. This includes:
- A building
- A converted flat
- Purpose build flats
The changing image of HMOs
HMOs have often been regarded as likely to attract benefits claimants and students, rather than prime tenants. This reputation is beginning to change, as the high price of renting in city centres is encouraging many young professionals to rent a room in a shared house rather than a flat.
Many investors are now seeking to cater for this lucrative market by providing high-quality accommodation in fashionable areas.
Specialist funding for HMOs
With our help, finding a lender for both licensed and non-licensed HMOs can be straightforward, although each lender has its own approach and criteria, and costs may be a little higher than comparable buy to let arrangements,
Some will base their valuation on the price achieved if it were purchased as a single dwelling, restricting the amount that you can borrow. However, others will base their valuation on the achievable rental income or ‘investment value’ when making their lending decision.
Some may only consider you for an HMO Mortgage if you are an experienced landlord. Most will make it a condition of the mortgage offer that you are deemed ‘fit and proper to run an HMO.
Other considerations may include:
- The number of letting rooms and expected or actual rental income
- Your experience as a landlord
- Whether you’ll be managing the property yourself or using managing agents
- Types of tenants
- Loan amount
- Your credit rating
- HMO Mortgage Rates and Fees
HMO mortgages are generally more expensive than a typical buy-to-let loan and harder to secure. This makes it very important to ensure you get a reasonable rate from a lender. The amount you're paying in interest will directly affect your income.
Using an independent mortgage broker will give you access to a broader range of lenders, including lenders who will be able to tailor a package to suit your needs completely. Your mortgage broker will also be able to help you through the application process.
Can a limited company get an HMO mortgage?
We encourage applicants wishing to use their limited companies or SPVs. Some lenders will accept an existing trading company, and others will require an SPV (special purpose vehicle), which is a company solely designed to hold and rent properties.
Financial solutions from Rangewell
The property market is highly competitive, and it is important to have expert help to get the kind of funding that will help you reduce your outgoings.
At Rangewell, we can use our property finance expertise to support your business – and ensure that you have the financial solutions you need. We can help source business lenders who can provide specialised HMO funding - and search their offerings to find you the lowest HMO Mortgage rates. By doing this, you get to keep as much of the rent received as possible, helping you make more profit.
REAL EXAMPLES OF WHAT WE CAN DO
Help arrange funding for a first-time HMO landlord
Find the most competitive funding arrangement for student let
Find finance to allow a landlord to secure a large house close to a London tube station
Source funding to allow a landlord to build his property portfolio
Arrange funding based around a remortgage of a landlord’s existing HMO property to allow him to buy another
Discover our range of finances
Every type of finance for every type of business
Our goal is very simple - to help businesses find the right type of finance as quickly, transparently and painlessly as possible.
Helping you build your profits
Improve your returnsExperienced investors are seeing the opportunity to raise the overall rent earned from a property by renting rooms on an individual basis.
Funding based on existing propertyWe can help you remortgage an HMO you already owning, providing cash for buying additional property.
A solution tailored for HMO landlordsWe can approach lenders who may lend based on the investment value of your property - the amount it will realise in rent, rather than its value as a property.
Funding for multiple propertiesHMO lending can be arranged for multiple properties, allowing you to grow an HMO business.
High loan to valueHMO mortgages can provide up to 75% LTV, making it easier for you to buy the property you want.
Maximise your profitsWe can help you find the most competitive funding, ensuring that you can maximise your returns.
Download Rangewell’s free and detailed guide to Property Finance
What types of Property Finance are there - which is right for you?
Why not all providers are equal
How we can help you pay less
The downsides to Property Finance - and how to avoid them
How to arrange Property Finance - What paperwork do you need?
Key terms explained
Download your Rangewell Business e-Book
Available in ePub, mobi and .pdf format
Frequently asked questions
Have a question?
The standard purchase price for an HMO licence fee is £1,100, typically split into two payments. For larger HMOs with more than 10 units of accommodation, the cost is usually increased by an extra £50 for each additional accommodation unit more than 10.
Failing to have an HMO licence is a criminal offence and is subject to an unlimited fine. In addition, it is an offence if the landlord or the person in control of the property fails to apply for a licence or allows for the property to be occupied by more people than permitted under the licence.
An HMO is defined as a proeprty that is let to 3 or more people from 2 or more households. Two people living in the property who aren't related will not be given HMO satus.
HMO mortgages can be restricted to experienced landlords. Some lenders will only accept applications from people who have been landlords for two or more years or who have experience in HMO letting. If you're a first-time landlord, you may struggle to get an HMO mortgage approved, and you may need to start with letting a property to a single household.
Once you have experience of letting pout property, you may be closer to letting out HMOs. If you have a standard buy-to-let mortgage, you'll need to approach your lender again and see about remortgaging to an HMO deal. Speak to Rnagewell for more information.
An HMO may be classed as a 'residential investment', but it differs from traditional buy-to-let property investments. While gross annual rental income can be higher, HMOs can be more costly to own and manage and should be classed as a commercial investment.
The Council can refuse to provide a licence if the property doesn't meet the right conditions or if the licence holder isn't fit or the proper person to hold the license. Whether under the mandatory or additional licensing scheme, all licences can be issued for up to five years. Remember, you'll need to pay a fee when applying.