HMO Finance: How to Fund Your House in Multiple Occupation

So you've decided HMOs are for you. You've found a property with potential. You've run the numbers and they stack up. You're ready to move forward. Now you need finance. And here's where things get interesting.

HMO finance isn't the same as standard buy-to-let finance. The products are different, the lenders are different, and the criteria are different. Some high street banks won't touch HMOs at all. Others will, but with restrictive terms and lower LTVs.

Meanwhile, specialist HMO lenders offer products specifically designed for this market—but they come with their own quirks and requirements.

In this article, we're breaking down everything you need to know about financing HMO properties: what products are available, which lenders to use, how much deposit you'll need, and how to structure deals for maximum cash flow.

Why HMO Finance Is Different from Standard Buy-to-Let

Let's start with why HMO mortgages are treated differently.

Lenders See HMOs as Higher Risk

From a lender's perspective, HMOs carry more risk than standard rentals:

• Multiple tenants mean more turnover
• More regulation means more compliance risk
• Properties are harder to sell if repossessed (fewer buyers want HMOs)
• Management is more complex

Because of this perceived higher risk, HMO mortgages typically have:

• Lower LTVs (usually 75% maximum, sometimes only 70%)
• Higher interest rates (often 0.5-1% above standard buy-to-let)
• Stricter lending criteria
• Higher rental coverage requirements (usually 145% vs 125% for standard BTL)

Not All HMOs Are Treated Equally

Small HMOs (3-4 tenants) are easier to finance than large HMOs (5+ tenants). Many lenders treat small HMOs as standard buy-to-lets if all tenants are on a single tenancy agreement.

Large HMOs require specialist products and often need mandatory licensing, which adds another layer of scrutiny.

Purpose vs Product

Some lenders care about the number of rooms. Others care about whether the property is licensed as an HMO. Still others care about how you're letting it (room-by-room vs whole property).

This lack of standardisation means you need to understand each lender's definition before applying.

The Different Types of HMO Finance

HMO financing isn't one thing—it's several different products depending on what you're trying to achieve.

How Much Deposit Do You Need for an HMO?

This is the question we get asked most often. The answer depends on the finance route you choose.

Can You Get 85% LTV HMO Mortgages?

Occasionally, for small HMOs (3-4 tenants on a single tenancy agreement) treated as standard buy-to-lets, some lenders will go to 85% LTV. But these are rare and usually require significant experience.

For most investors, plan on needing 25-30% deposit.

What Do HMO Lenders Look For?

HMO lenders assess applications differently from standard buy-to-let. Here's what they care about:

1. Rental Coverage

HMO lenders want to see that rental income comfortably covers mortgage payments.

Some lenders use 125% for small HMOs. Others insist on 145-150% for large HMOs.

2. Your Experience

Many HMO lenders prefer (or require) landlord experience:

• First-time landlords: Limited options, may need larger deposits
• Experienced landlords (2+ properties): Better rates, more lenders
• Portfolio landlords (4+ properties): Best rates, highest LTVs
• Existing HMO landlords: Premium terms

If you're new to HMOs but have buy-to-let experience, most lenders will consider you. If you're completely new to property, expect to start with a smaller HMO and a larger deposit.

3. Property Location and Demand

4. Licensing Status

If the property requires licensing (mandatory or additional), lenders want to see:

• That you've applied for (or obtained) the license
• That the property meets licensing standards
• Proof of compliance with fire safety and other regulations

Unlicensed HMOs won't get financed. Period.

5. Your Financial Position

Unlike bridging, HMO mortgages do care about your income:

• Most lenders want minimum £25-30k personal income
• Some waive this for experienced portfolio landlords
• Self-employed applicants usually need two years' accounts
• Company-owned HMOs have different criteria

6. Exit Strategy (For Bridging)

If you're using bridging or development finance, lenders need a clear exit:

• Refinancing onto HMO mortgage: Need evidence of rental potential
• Sale: Need comparable sales evidence
• Development completion: Need realistic timelines and costings

The Best HMO Lenders in 2025

Not all lenders are created equal. Here are the main players in HMO finance and what they offer:

For Standard HMO Mortgages:

For HMO Bridging and Refurb Finance:

How to Structure an HMO Deal for Maximum Cash Flow

Let's walk through a real example showing how to structure HMO finance for optimal returns.

Common HMO Finance Mistakes (And How to Avoid Them)

Can You Use Limited Companies for HMO Finance?

Yes—and increasingly, this is the preferred structure.

Many experienced HMO investors run portfolios through limited companies. If you're serious about HMO investment, speak to an accountant about whether this structure makes sense for you.

The Bottom Line: HMO Finance Rewards Preparation

HMO finance isn't difficult, but it's more complex than standard buy-to-let. You need:

• The right lender for your situation
• Realistic numbers and cost projections
• Clear exit strategies
• Proper licensing and compliance
• Sufficient capital to execute properly

Get these pieces in place and HMO finance becomes straightforward.

At Black Props, we've financed dozens of HMO purchases, conversions, and refinances. We know what works, what doesn't, and how to structure deals that actually deliver the returns you're targeting.

If you're planning an HMO investment and need finance, let's talk. Because a well-structured HMO deal can transform your property portfolio—but only if the finance is right from the start.