Finding a mortgage for BTL HMO property for leverage and security

Basically, you need to have a basal principle of ‘sharing’ facilities. Examples of this are as follows:

• A house that was transformed into bedsits where each tenant rents their personal room (which may, or probably won't have a kitchen area) and shares bathroom/shower-room and WC and maybe a kitchen.
• A university student share house, where each student rents merely a room and shares all the other facilities - kitchen, communal lounge, bathroom/shower-room and WC.
• A flat or house where 3 or more unrelated tenants share the accommodation and facilities.
• An owner-occupier who has 3 or more lodgers with a licence to occupy their lodging accommodation.

A brand-new class of planning use was brought in in 2010 called C4 which covers all properties where 3 or more people share a dwelling. You will require an HMO licence if the property is:

• 3 or more storeys including a basement and above shops.
• Rented to 5 or more tenants
• Some or all of the occupants share bathroom, WC and/or kitchen facilities

Organizing finance to acquire a BTL investment property arranged for a HMO defined above, is usually harder than getting a mortgage on a single dwelling BTL investment property. While there are plenty of banks and banks who will offer the investor a mortgage to get a property to be let as one house or one flat, rental properties that fall within the criteria of multiple letting , multiple occupation HMO investment property can be more difficult than initially it could seem. In the latest UK BTL mortgage market there are probably only a maximum of 4 lenders who offer mortgage finance on HMO's.

From an investment perspective you could dispute that a place rented to multiple tenants would offer better rental security, since the rental revenue is not really down to one household's income. The rent income for your property might be made up of four or five rents from your individual tenants.


Should one tenant lose his employment, or unexpectedly move out or several other situation leading ultimately into a rental void, the property owner as only lost 1/4 or 1/5 with the rent for that month or time it takes to re let this room / bedsit / flat. However the upside might be the investor should ultimately make use of greater rental yields when compared to to a singularly rented house or flat, plus greater return on the initial deposit employed in to the investment, when compared to same capital invested in regular BTL property.

Checking out the investment on the bankers perspective it can be seen as a riskier investment profile since the property owner may need greater hands on experience with dealing with rental property, dealing with tenants , and maintaining a larger property. Could also be additional costs involved towards landlords for the duration of ownership such as local authority licencing fees, additional health and safety law requiring higher maintenance and capital costs of installing of fire doors, fire-proof furnishings, security systems, fire escapes and so forth. This additional complexity would lower the resale value and variety of potential investors who could purchase the property from your bank if the bank ever had to repossess the house or property from the existing owner and also have to sell on.