HMO Mortgages Made Simple | Specialist HMO Mortgage Brokers

What Is an HMO Mortgage?

​

A House in Multiple Occupation (HMO) is a property rented out to three or more tenants who are not from the same household and who share facilities such as a kitchen or bathroom. These properties are popular with students, young professionals, and city-based renters, offering landlords higher rental yields than traditional single-tenancy lets.

​

Due to the increased complexity and regulatory requirements, HMOs require a specialised mortgage product. An HMO mortgage is designed to reflect the unique risks and returns of multi-tenant rental properties and is assessed differently from a standard buy-to-let mortgage.

​

​

Why HMO Investments Are So Popular

​

HMO properties consistently deliver higher yields than traditional single-tenancy rentals. In 2024, average gross rental yields on HMOs in the UK range between 8% and 12%, depending on location and property type.

​

You’re collecting rent from multiple tenants, which spreads your risk. Even if one room is vacant, the others still generate income. For landlords aiming to maximise cash flow, HMOs often make more sense than conventional buy-to-lets.

​

That said, HMOs do come with greater responsibility — and this is where our expertise comes in.

​

​

Licensing and Legal Considerations

​

If you're considering an HMO mortgage, you need to be aware of licensing laws and planning restrictions. Failure to comply can lead to costly delays or fines.

​

Most local authorities require an HMO licence if you let your property to five or more people forming two or more households. However, some councils extend this to smaller HMOs through Additional Licensing schemes.

​

Then there’s Article 3 Direction, introduced under planning law. This affects landlords who want to convert a family home into an HMO in certain areas. Where Article 3 is in effect, you'll need planning permission to change the property’s use class from C3 (single dwelling) to C4 (HMO).

​

Not all lenders will approve mortgages for properties requiring Article 3 approval, but we know which lenders do.

​

Article 4 Direction is a planning restriction imposed by local councils to remove permitted development rights in specific areas. When Article 4 is in force, you must apply for planning permission to convert a single-family home (C3) into a small HMO (C4).

​

It is used by councils to control the spread of HMOs in areas with high concentrations, often in student cities like Oxford, Nottingham, and Manchester.

​

​

HMO Mortgages for Limited Companies

​

Many landlords now purchase HMO properties via a limited company (SPV – Special Purpose Vehicle) due to changes in mortgage tax relief. This can be more tax-efficient for higher-rate taxpayers and portfolio landlords.

​

Drummonds Finance Group has access to lenders that specialise in limited company HMO mortgages, many of which are not available on the high street. We’ll also guide you on how to structure your SPV correctly if you’re setting one up for the first time.

​

​

What About First-Time HMO Landlords?

​

Some lenders do require prior experience as a landlord before offering an HMO mortgage, but not all. We work with providers who will consider first-time landlords, provided the property is well-managed, licensed appropriately, and affordability is sound.

​

If you’re moving from single lets to your first HMO, or you're entirely new to investing, we’ll show you precisely what you need to qualify.

​

​

Post-Mortgage Support: Managing Your HMO

​

We don’t stop helping once the mortgage is in place.

​

Our team continues to assist you after completion, helping you manage:

• HMO revaluations (to improve LTV and raise capital)

• Interest-only vs repayment options over time

• Insurance cover suited for HMOs

• Portfolio reviews and exit strategies

• Re-mortgaging when your fixed deal ends

​

We also connect you with trusted letting agents, accountants, and solicitors who understand the HMO space.

Whether you're managing the property yourself or outsourcing it, we’ll help you build a plan that protects your investment and keeps income flowing.

​

​

Oxford: A Hotspot for Student HMOs

​

Oxford remains one of the UK’s most in-demand cities for student HMOs. With a high student population, limited housing stock, and strict local licensing, the market offers strong yields, but can be challenging to navigate.

​

East Oxford, Cowley, and Headington are among the most popular areas, though the Article 3 Direction applies across the city. We’ve helped dozens of Oxford landlords secure compliant HMO mortgages and understand how to position your application for success in this tightly regulated market.

​

If you're investing in Oxford, our local expertise makes a real difference.

​

​

Real-Life Example: From Buy-to-Let to HMO in Oxford

​

Sophie, a landlord based in London, had previously let out a one-bedroom flat in Reading. Wanting to expand her portfolio and boost rental income, she identified a five-bedroom property near Cowley Road in Oxford, a hotspot for student renters.

​

The property had existing Article 4 restrictions in place, so we guided Sophie through the planning and licensing process before applying for the mortgage. Despite it being her first HMO, we secured a competitive five-year fixed mortgage with a 25% deposit at 5.39%, through a lender experienced with Oxford regulations.

​

The rental yield was projected at 8.2%, and the property was fully tenanted within two weeks of completion. Sophie is now looking to remortgage another property to fund a second HMO in Headington.​​​