What is a buy-to-let HMO mortgage?

Q: What is a buy-to-let HMO mortgage?

A buy-to-let HMO mortgage allows property investors to purchase a house in multiple occupation. A property will be a HMO, which stands for ‘House in Multiple Occupation’ if it both has at least 3 tenants living in it, forming more than 1 household, and these tenants share a toilet, bathroom, or kitchen facilities. Read More

Buy-to-Let HMO Mortgage

HMO Buy-To-Let Mortgages

A Buy-to-Let HMO mortgage allows property investors to purchase a house in multiple occupation. A property will be a HMO, which stands for ‘House in Multiple Occupation’ if it both has at least 3 tenants living in it, forming more than 1 household, and these tenants share a toilet, bathroom, or kitchen facilities.

These properties tend to be quite large, and often involve many moving parts with so many disparate tenants coming together in the same space. Given how intricate HMO investments can be, our Buy-to-Let HMO mortgage was created from the ground up with landlords in mind. It can be adapted to a range of HMO scenarios, allowing you to comfortably focus on your tenants and long-term goals.

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Expertise in Complex Circumstances

Our Buy-to-Let HMO mortgage is designed for landlords looking to target specific tenants in this sub-sector, which may include students or young professionals.

Loan amount: £150k – £3m
LTV: 75%
Interest rates: tracker rates (variable)
Charge type: 1st charge
Term: 3 years (no early repayment charges in year 3)
Completion time: from 10 days
Location of property: England, Wales

Calculate Your BTL Loan Amount

Need an instant quote? Use our online buy-to-let mortgage calculator to determine how much MFS are able to lend for your circumstances. Just type in a few details about your investment, change values as you need, and find out which of our products is most suitable for you. You can also receive your quote by email. Then, get in touch and discuss the finer details with us.

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5 simple steps to get your HMO Buy-to-Let mortgage

short-term buy-to-let mortgage

Step 1: Loan Enquiry & Indicative Terms

To get your buy-to-let HMO mortgage application started, you will need to send through an enquiry. This can be done online, over the phone, or via email. Once we receive your initial details, we’ll assign you with an underwriter who will be in touch within 4 hours. They will gather a few basic details from you, and provide an indicative tier, applicable rate, and loan size.

interest only buy-to-let mortgage

Step 2: Underwrite & Issue DIP

Your underwriter will then request a small number of documents from you to progress the deal, so long as you’re happy to move forward. Once we have what we need, we’ll move to issue credit approved terms via a Decision in Principle (DIP). These terms will be verified by our Credit Committee, and all of this can be completed within 24 hours.

interest only buy-to-let mortgage

Step 3: Valuation

Once you have signed the DIP and covered the valuation and admin fees, we can get your HMO valued. Your assigned underwriter will handle everything, working with our panel of valuers to verify the security’s details match up with the DIP. Again, valuations are usually instructed within 24 hours of fees clearing.

short-term mortgage for buy-to-let

Step 4: Legal Documentation

As we reach the final stages, we’ll work with trusted solicitors to move the deal towards completion. They’ll review the details, issue contracts, and work to get your deal completed on time. We instruct the lawyers we work with quickly and throughout; you’ll be kept in the loop. If there any complications or issues, you’ll be the first to know.

interest only buy-to-let mortgage

Step 5: Loan Drawn Down

So long as everything is accounted for, we will issue your funding, and you’ll be free to use it for your HMO investment. From start to finish, we may be able to deliver capital in as little as a week from your initial enquiry.

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Contact Us

Speak to one of our underwriters or BDMs on the phone, via chat or email about your case, however complex it might be. We will try our best to say yes to you, instead of finding a reason to say no.

Chat to our Buy-To-Let Team:

Email: info@mfsbtl.com

Phone: +44 (0)20 7060 5678

Chat to our Business Development Managers:

Email: brokers@mfsuk.com

Phone: +44 (0)20 7060 1234

Buy-To-Let HMO Mortgages

All you need to know:

How big can HMOs be?Do you place limits on how large the HMOs you lend on can be?Will the number of rooms affect the loan or your requirements?Do HMO landlords need a license?What kind of tenants live in an HMO?Do mortgages for those with bad credit cost more?Do you offer mortgages for other large investments?Are your mortgages available to first time buyers/landlords?

How big can HMOs be?

To be eligible for an Buy-to-Let HMO mortgage, your property needs to meet certain conditions. As a minimum, an HMO must have at least 3 tenants living in it as a single household, sharing a toilet, bathroom, and/or kitchen facilities. A home will be considered a large HMO if it has at least 5 tenants who share facilities.

Do you place limits on how large the HMOs you lend on can be?

No, we have no room limits on our HMO Buy-to-Let mortgages.

Will the number of rooms in my HMO affect the loan or your requirements?

Across all our BTL mortgage variations, deals are split into 4 tiers. Tier 1 mortgages are for our most straightforward cases, with tier 4 mortgages reserved for the most complex of cases.

Within our tracker Buy-to-Let mortgage for HMO properties, investors will fall into either tier 2, 3, or 4. If you’re HMO property has 6 or fewer beds, you’ll sit in the tier 2 category. Tier 3 mortgages are offered to those investing in properties with up to 12 beds. Beyond this, you’ll likely sit within our tier 4 range.

Substantial HMO investments, with 7 or more rooms, may require a commercial valuation. Your assigned underwriter will break down these details and guide you on what’s needed.

Do HMO landlords need a license?

If you rent out a property as a HMO in England or Wales, you must check in with your council to see if a licence is required. Separate local authorities will have different rules on where licences are needed.

If you’re renting out a large HMO however, you must have a license, regardless of where the property is based. Your local authority will guide you on the licensing application process, and guidance can be found on the government’s website.

Our buy-to-let mortgages for HMO properties may require evidence of a local authority licence, or hold a condition for a license to apply following a purchase.

For HMO property investors, an Article 4 Direction may catch them out here. Generally, changing a single dwelling house (use class C3) to a small HMO shared by up to six unrelated residents (use class C4) does not require planning permission, whereas larger HMOs will.

But, an Article 4 Direction can be made by a local planning authority to remove certain permitted development rights in all, or part of, its area. In short, this may result in planning permission being required for certain types of developments that would not otherwise require an application for planning permission.

It’s important to get your license situation sorted as soon as possible, as landlords could face unlimited fines for renting out an unlicensed HMO.

What kind of tenants typically live in an HMO?

The type of properties our buy-to-let HMO mortgages are used for can be occupied by a wide range of tenants. Typically though, HMOs tend to be popular with students or young professionals looking for lower cost accommodation.

They can also be utilised by holiday seekers, certain state benefit claimants, or families. Regardless of who you’re renting to, you need to focus on your requirements. Your HMO property, especially if it’s large, will need to meet certain standards and obligations. This is where the licensing rules will come into play.

Do mortgages for those with bad credit cost more?

At MFS, we’re open to issuing Buy-to-Let mortgages to bad credit clients. But, to reflect the added risk, the interest rates involved may be slightly higher. Those with poor credit histories will likely fit into our Tier 3 and 4 brackets. These tiers factor in borrowers or properties with added complexity, such as:

Large structures
Expats
Foreign nationals, or overseas companies
Complicated financial or corporate setups

Do you offer mortgages for other types of larger investments?

As a specialist lender, we can accommodate several large-scale investment strategies. On top of HMOs, this includes multi-unit freehold blocks (MUFB) of up to 30 units, large portfolios of properties up to £10m with MFS, and multiple properties on one loan.

Are your HMO buy-to-let mortgages available to first time buyers/landlords?

We pride ourselves on being a flexible lender. All our products are available to first time investors, along with seasoned portfolio owners. But, inexperienced landlords, who have been in the market for less than a year, will be limited to our tier 4 (bespoke) mortgages.