What is an HMO?

An HMO (House in Multiple Occupation) is a property rented out to multiple households. For a property to be classified as an HMO, it must meet one of the following criteria:

• Shared Amenities: A building or flat where more than one household shares a facility like a bathroom, toilet, or cooking area. This is the most common type of HMO, such as shared houses, student lets, or professional lets.
• Basic Amenities Shared: Tenants share basic amenities, or the property lacks one or more of them (toilet, personal washing facilities, and cooking facilities). The building does not consist entirely of self-contained units.
• Multiple Households: At least three people from more than one household occupy the building.
• Converted Property: A property that has been converted and does not contain self-contained flats (and lacks shared amenities).

Self-contained Flats:
A property is considered self-contained if each unit has its own premises and exclusive use of the three basic amenities (toilet, washing, and cooking facilities).
In some cases, if a block of flats does not meet building regulation standards and fewer than two-thirds are owner-occupied, it’s defined as a Section 257 HMO, though this is less common.

What is an HMO Mortgage?

An HMO mortgage is different from a buy-to-let mortgage because it typically offers a higher rental yield, though it requires more management to maintain a quality living space. Rent is often inclusive of utilities such as water, gas, and council tax.

Not all buy-to-let lenders offer HMO mortgages, but the market is evolving, and more lenders now consider smaller HMOs, depending on the tenancy structure.

How is My HMO Valued?

• For HMOs with 6 or fewer rooms, most lenders use a bricks-and-mortar valuation (building value).
• For larger HMOs (7 or more tenants) or those in Article 4 areas with “Sui Generis” planning permission, we can secure commercial funding based on the “going concern” of the HMO, considering both income and building value.