What is an HMO mortgage?

HMO is a House of Multiple Occupancy, so an HMO Mortgage is borrowing on a property that has an HMO setup. It’s just like a Buy to Let, but is specifically designed for a property that’s got multiple occupancy, or separate rooms.

For example, A house with four or five rooms that accommodates young professionals, or student accommodation. It can provide a property investor an even greater return if they buy an HMO property, or convert one of their current portfolio properties. More rental can usually be achieved by renting per room, rather than as a full property. 

What are the different types of HMO mortgages?

Just as with standard Buy to Let mortgages, you can get a Repayment or Interest-only mortgage. With any type of mortgage available, predominantly lenders want you to be on a medium term Fixed-rate of around five years, due to the uncertainty surrounding brexit and the covid pandemic.

Who can get an HMO mortgage?

You might struggle to get an HMO mortgage if you’ve never owned a property and have no experience of property management or property investment. Typically lenders don’t tend to lend to First Time Buyers on HMO investments.

Would you start with a Buy to Let then go on to an HMO?

Typically you would start investing in property with a standard Buy to Let and ensure that you’re earning money from your rental first. A House of Multiple Occupation is a little bit more costly, but the reward that you would get is far greater. 

You also need to bear in mind the occupancy rate when you take on an HMO property, as students are only going to be there for a part of the year. HMOs offer a fantastic return, but the turnover of tenancancy is quite quick, so the investor will need to consider whether they want that kind of risk.

Can you have Buy to Let properties as well as HMO properties? 

You can have a mixture of everything. Taking on HMO properties is about maximising your return. If it’s in the right area and you attract the right type of tenant, for example, near hospitals, universities. There can be local authority restrictions on the number of HMO properties in a single postcode area, as they don’t want the area to become too saturated with one type of occupant, and attempt to retain a good balance of residents, so it’s worth doing research in your chosen location.