HMO Limited Company Mortgage
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Podcast approved by the Mortgage Advice Bureau on 08/07/2025.
What can you tell us about this part of the property market?
One thing that often comes up with HMO as a rule is that there’s no solid definition. It’s driven by the local authority. If you’re looking to buy an HMO property for rental purposes, or potentially convert one, you need to find out whether it needs to be licensed or not, which is specifically defined by each local authority.
As a broad guideline, if you’re going to let a property room by room, or it has four or more bedrooms, typically it’s an HMO. That tends to be the lender’s approach. But in the past I’ve had a client renting a six bedroom property to a family – yet the bank dealt with it as an HMO, because it was simply over their Buy to Let bedroom limit.
Something I found surprising when I looked at the stats is that this is actually a shrinking sector. Since 2018 in the UK HMOs have actually decreased by 9.5%. It’s down from 515,000 to 476,000 properties.
That decline has largely been led by London, where there’s been a 23% decrease alone, pulling down the national average. In England now, there’s around 489,000 HMOs – which is down 2.4% since 2022.
It’s surprising because more people want affordable homes, and this is the most affordable kind of home there is. So if you’re looking into this, it’s probably a great time to get involved.
Can I get an HMO mortgage through my limited company? How does it work?
Yes, and there’s such a strong correlation that lenders almost expect you to be buying in a limited company. We’ve talked on other episodes around Buy to Let through limited companies, so we won’t go too far into that.
It’s always really important to get specific tax advice before you apply for that mortgage. You don’t want to apply for a limited company product, and then find your accountant or tax advisor says that isn’t the most tax effective approach.
We often find ourselves involved in three-way conversations – the client, us on the mortgage side, and the tax advisor or accountant. The tax piece really sits alongside the mortgage advice on this.
What criteria does a limited company need to meet to be eligible for an HMO mortgage?
There are two things lenders look for. First, that the company itself is a Special Purpose Vehicle (SPV), which is explicitly for the buying, renting and selling of property. That’s often described by a SIC code, which stands for Standard Industrial Classification, which is the second thing lenders check.
If anyone’s ever set up a business before, the SIC code is the definition you list on Companies House. Certain lenders accept certain codes. So once we get to that point, we can guide you as to what’s acceptable.
If, for example, you’re buying the property as part of a larger corporate setup, or the structure is more complicated with holding companies and investors, lenders will accept it but you may have to pay more for the mortgage. The more complex something gets, the more expensive it becomes.
None of these things are a problem. There are some certain showstoppers around permissions of businesses, which I won’t go into now, but if it’s a nice, vanilla setup, done correctly by yourself or your accountant, it should sail through.
If it’s more complex, we’ll guide you through and work with the right lender. Sometimes it involves changing permissions of the company or setting up a new one – done in conjunction with your accountant. We don’t advise on this, but we can tell you what a lender will and won’t accept.
How much deposit does a limited company need for an HMO mortgage?
Much like any mortgage product, the bigger the deposit, the better the rate. To get something really competitive in this space, you should be aiming for a 25% deposit. That’s been the golden rule with any investment property for a long time now. Things do fluctuate, but at time of recording in May 2025, that is a pretty good start point.
It’s possible to go as low as 15%, but the lender may expect fairly significant landlord experience or even specific HMO experience. They may be looking for a really high yield. Whilst that’s possible, I wouldn’t necessarily hang your hat on it. I’d be aiming for 25%.
If you can increase the deposit further, you’ll open up more lender options and potentially better rates. But 25% will give you a good selection of lenders and products to choose from.
What’s the benefit of getting an HMO mortgage instead of Buy to Let through a limited company?
Fundamentally, it’s the same thing. The assessment is the same. Please do look at our Buy to Let page as that covers this in a lot of detail. It’s more about the definition of the property, which is driven by the local authority.
It’s not so much a choice – it either is an HMO or it isn’t. There’s no pros or cons. It just drives which lenders and products are available to us.
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Can I get an HMO mortgage under a limited company as a first time landlord?
Yes, but you do have less choice. It’s slightly more specialist. Lenders are often looking for experienced landlords – they don’t necessarily want to be the first one to take the risk.
If you don’t own any other Buy to Let properties, lenders take a more cautious view in how they underwrite you. It is a little bit more specialist. so they look for that experience. It’s not always the case, but you may have fewer lenders to choose from.
They will look at your scenario and circumstances. Effectively, is it reasonable for you to do this? It’s not necessarily easy and straightforward – there are complexities with this kind of property and the tenancy agreements. You can do it, but expect to be asked more questions and have a little less choice.
What if the limited company has poor credit? Could I still get an HMO mortgage?
Any company has a credit score, much as you do personally. However, most lenders these days ask for a full personal guarantee, even though you’re buying through a vehicle. So the company credit rating will be looked at as much as your own.
It’s the usual thing around any credit issues: what happened, when and how much. Once we work through that, we can see what lenders are applicable. A credit file is much like your driving licence. Anything more than six years ago isn’t looked at by any lender.
If all bills have been kept up to date in the last two years, most lenders are okay. If you’ve had any issues within that time, we need to work through it, but lenders can be quite pragmatic, because this is an investment property. They know that there are costs and tenants might not pay on time. But if they see habitual behaviour where missed payments are a constant factor, that will limit your choice.
The company credit score is just one factor. It’s your personal situation, plus your experience. We put all of those things together and then we can find the right lender.
Can I remortgage my HMO properties into a limited company?
Before you even get to the mortgage question here, you need to make sure you’re doing the right thing for tax purposes. If you own properties in personal names and you put them into a company, HMRC could deem that to be a purchase – in which case stamp duty is potentially due.
It can be done, but you need to speak to a properly qualified accountant or property tax specialist. Don’t do all the mortgage work and incur fees for surveys, valuations and legal work, only to discover a potentially huge bill from HMRC that you hadn’t anticipated.
Is it worth buying an HMO property? What are the pros and cons of an HMO mortgage through a limited company?
The upside of owning a property is always the same, particularly if it’s a rental property. You can benefit not just from the rental income, but also any growth in property value over time. It’s a long-term gain. Typically you need to own a property for 10 years to get a realistic return. So go in with your eyes open.
Specifically, HMOs are higher yield and there’s great demand for them as more affordable homes. There’s also a greater choice of lenders than there used to be.
In terms of disadvantages, it’s more specialist, so there are fewer lenders, but there are still plenty out there. With an HMO, obviously, you’re having multiple tenants in one property, and more tenants could mean more hassle.
The mortgage costs are also slightly higher, but you need to to look at it in the round – in terms of your tax liability, all the financial costs and your position at the end of the year. That’s why tax and Buy to Let are intrinsically linked.
Are HMO mortgages more expensive for a limited company? What costs are involved?
With this type of mortgage product there’s an element of paying for that specialism. It’s a niche. There are fewer lenders in the space and less competition, so they can charge more.
We tend to find that people who are convinced this is right for them have had tax advice and established that, although the mortgage might cost them a little more, it’s potentially worth it overall. They’re making savings in tax and potentially getting more profit.
As with any mortgage product, you’ve got to consider the interest rate and any lender fees. If they can be added to the loan, interest might be due on them. Are there survey fees? What legal fees might there be?
Again, legal fees might be a bit higher because of the complexity. There’s potentially greater risk here, so it might cost you more. But it might well be that your accountant advises you to do it anyway, because overall you’re potentially better off.
How do I get an HMO mortgage through a limited company?
The process is broadly the same. We try to make our clients’ lives as easy as possible, through building our own platform, called Everglades. It’s really helpful because if you’re looking at HMO, you probably have multiple properties. Your situation may be complex.
We collect all the information we need to do the research, then come back to you. You’re going to have your hands full as a landlord. Let us do all the heavy lifting and make sure we come back to you with the right outcome.
This is a specialist sector and most banks simply do not deal with the public – they are broker-only. It’s not just a case of finding the best lender for you, it’s finding the best broker for you.
We’re part of one of the largest distribution networks in the country, which means we tend to get preferential rates, exclusive products and direct access to underwriters. We save you as much money as possible, and ultimately save you time and hassle, too.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.
For specialist tax advice, please refer to an accountant or tax specialist.
Approved by the Mortgage Advice Bureau on 08/07/2025.