HMO Mortgages

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An article on HMO Mortgages, the various types of HMO Mortgages including common criteria, common rates, epc, etc..

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The Larger the HMO the fewer the Lenders

When we surveyed 80 Mortgage lenders (April 2022), only 31 offered mortgages for Houses in Multiple Occupations (HMO).

30% is not bad, and it is a specialist area. Except we can divide it up even further.

Here are the most relevant HMO Planning Classes for Landlords:

• C3 class is for standard family occupancy (no HMO options)
• C4 class is for small HMOs (of between 3 and 6 occupiers)
• Sui Generis covers large HMOs of 7 or more people.

What is interesting to note and the point of this post is that mortgage lenders typically follow the same brackets. Out of the 80 mortgage lenders surveyed:

• 49 only offers finance on C3
• 31 offer finance on C4 (3-6 Occupant HMOs)
• 19 offer finance on Sui Generis (7+ Occupant HMOs)

It shows lenders' appetite for HMOs decrease as the property gets larger and larger.

The correlation with planning ends there, but still, the number of lenders decreases as the number of bedrooms increases.
When you get to nine beds, the number of lenders falls from 19 to 12. Eleven beds, you are down to 9 lenders.
Eventually, you may end up leaving the standard BTL route and looking at commercial lending options.

The less competition in large HMO (Sui Generis) space means higher mortgage rates from more specialist lenders. The problem arises that the fewer in the market, the smaller the criteria range available. Increasing chances of you not fitting the requirements of the shrinking amount of lenders available.