Taking advantage of HMOs with Bridging Loans

Property investment is thriving in the current climate. Buyers are using bridging loans in the UK to take advantage of the stamp duty holiday. This is despite challenges posed by COVID-19. As a result, house prices are rising at an impressive rate.

According to Halifax, house prices in the UK rose by 1.6% in the month of August to reach £257,747. This is an annual increase of 5.2% – the highest rate recorded since late 2016. Residential property transactions grew by 15.6% in August. With interest rates hovering just above 0%, property investment is a popular option. But finding the right type of property to invest in, can be the real challenge. This is due to the number of options available.
Source: HMRC

We’re seeing a rise in demand for house in multiple occupation (HMOs).They’re popularity means we regularly deploy refurbishment loans to support HMO projects, and residential bridging loans for fast investments. Having spoken with our brokers and private clients, we anticipate the demand for HMOs will increase in the coming months.

But what are HMOs and how can short term bridging loans be used?

What is a HMO?

Put simply, a HMO refers to residential property shared by multiple tenants. At the end of March 2018, there were an estimated 497,000 HMOs in England and Wales. Since then, this number has increased. This is because the government changed the legal definition of an HMO in October 2018.

Now, the government considers a property an HMO if the following applies.

    • First, at least three tenants live there. This means they form more than one household.
    • Second, the tenants all share common toilet, bathroom and kitchen facilities. A property is considered a large HMO if there a five or more tenants living there.

The three advantages of HMOs

HMOs are rising in popularity due to the advantages they offer over traditional buy-to-let.
1) The number of tenants looking for a rental property is rising. Demand is outpacing supply. According to Zoopla, tenant demand is 33% higher than it was pre-lockdown. As a result, there are significant rental yields on offer.
2) There is less landlord exposure to arrears. If one tenant falls behind on their payments, landlords will still receive payments from the other tenants. This is different to a single let. If the tenant falls behind on payments, the entire income from the property is compromised.

  • There are fears people could lose their jobs in the coming months due to COVID-19 and a HMO could thereby protect landlords from a loss in rental income.

3) Landlords can benefit from the capital growth of the property. The value of real estate is rising because of increasing demand. This is likely to continue for the life of the stamp duty holiday.

Bridging and HMO

New HMO regulations were introduced in October 2018 regarding minimum safety standards. This was to prevent overcrowding, and a minimum amount of floorspace for each tenant was introduced. Landlords must therefore ensure their property has suitable kitchen, toilet and washing facilities for all the tenants.

Since the introduction of these regulations, we’ve worked closely with landlords, so they comply to these standards with the help of our development finance. Reassuring our clients HMOs meet their requirements.



Loans can be deployed within days of an enquiry being lodged. Bridging finance is also available for those completing on a buy-to-let transaction.

If you are planning light HMO refurbishments, check out our conversion and refurbishment loans or for more information, why not try our bridging loan hub.

bridging loan for auction properties

Contact us

Speak to us on the phone, via chat or email about your case, however complex it might be. We have a friendly, dedicated team and one of our underwriters will be happy to help you with your enquiry. We will always try to lend, and when we say yes – we mean it

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