Specialist
Commercial HMO Mortgage Service
Bespoke and professional property finance solutions
Bespoke and professional property finance solutions
If you are looking to buy a property and intend to rent it out to three or more people who are not part of the same household, you may need an HMO commercial mortgage.
Buying a property and renting it out may be an attractive opportunity. If you increase the number of tenants in a property, you could maximise the potential profit.
Call us on 0203 900 4322 to discuss your requirements.
While smaller Houses of Multiple Occupation (HMOs) are typically funded through specialist buy-to-let mortgages, larger HMO buildings such as mixed-use investments and purpose-built properties more often require a commercial mortgage product.
Commercial HMO mortgages provide a business-focused valuation and mortgage structure that considers the property’s rental yield and financial stability in addition to its pure market value. This offers limited companies and investors access to greater levels of funding and a tailored repayment structure that better meets long-term business needs.
At Clifton Private Finance we can help you secure the commercial HMO mortgage you need to make the most of the growing HMO market.
A House of Multiple Occupation (HMO) is a let property where there are three or more tenants, sharing facilities such as a kitchen and bathroom, but comprising separate households.
A standard buy-to-let (BTL) mortgage is not typically suitable for these circumstances, as standard BTL products exclude properties occupied by multiple independent households and are designed with a single or joint tenant in mind.
Larger HMOs are usually treated as specialist business assets instead. Lenders may also view HMO borrowing as higher risk because of higher tenant turnover and the potential for increased property damage.
Landlords investing in HMOs can look to specialist HMO mortgages to meet the more specific qualities of HMO properties and the relevant licensing considerations.
However, even these specialist mortgages have their limitations. HMO mortgage lenders whose products are tailored for smaller HMOs, those with fewer than seven tenants, may struggle to provide optimal finance for larger properties. Buildings that are purpose-built and designed for 7+ tenants typically require a commercial HMO mortgage.
A commercial HMO mortgage is structured to consider investment-focused property valuations and both regional and national HMO licensing requirements. It is suitable for:
There are two main types of commercial mortgage available for an HMO property:
Commercial mortgage lenders will often want to see thorough documentation to support your HMO mortgage. A business plan that includes financial forecasts backed by substantial research will greatly increase the chance of application success.
The rental income forms the core of a commercial HMO mortgage application, as it represents the property’s ability to sustain repayments over the term.
Things to consider include:
Defining the property type and size is essential for a commercial HMO mortgage application. Many commercial HMO mortgages are for large HMOs, but investors may want to consider a commercial mortgage even when buying a small HMO.
As part of the application, list the bedrooms so it is clear each tenant has their own bedroom alongside shared kitchen facilities, and include the use class for planning. Lenders also check that the property meets legal national standards for room sizes, kitchen and bathroom facilities, and fire safety.
Additional details include:
Your expertise as a landlord will help support your application, as many lenders prefer applicants with 1 to 2 years of standard buy-to-let or HMO experience, and most commercial HMO lenders want proof of prior experience as an HMO landlord.
If this is your first HMO or you are a first time landlord, it is recommended to be honest about your background and highlight any relevant knowledge so your application is presented clearly and realistically.
It is also important to show that you understand the licensing requirements. Larger HMOs may need an HMO licence from the local authority, and failing to apply where required can lead to significant penalties, so check the requirements of your local council as well as national regulations before you apply.
Established landlords and investors should declare any existing properties that form part of a rental portfolio.
Commercial HMO mortgages require slightly higher deposits than smaller HMO mortgages and residential buy-to-let finance. Maximum loan-to-value is often set to 70% by lenders.
At Clifton Private Finance, we work with the full market of specialist HMO mortgage lenders and will match you to an experienced and understanding lender who will take your application on a case-by-case basis, giving it the personal attention you deserve. Depending on your circumstances, we may be able to secure larger LTVs where the investment potential is clear. Our commercial finance team will help you explore your HMO mortgage options.
With a focus on business cash flow and rental yield, commercial HMO mortgages can offer flexibility for companies investing in multiple tenant properties.
Mortgages may be structured in several different ways, including:
With a deep understanding of HMO investments, specialist lenders can offer greater flexibility than many high street banks. For landlords and investors, this can lead to payment terms that take into account your tenant profile, support that’s tailored to your experience, and finance options that are more open to future restructuring should circumstances change.
Speak to one of our commercial HMO experts regarding your particular concerns and questions to help us tailor your HMO mortgage to your exact needs.
The clearest difference between standard HMOs and those that require a mortgage on a commercial basis is size. For many lenders, the shift comes once the property size exceeds 7+ bedrooms. However, this is not the only criteria and potential HMO landlords and investors should consider several factors.
At its most basic, large HMOs are those with seven or more tenants, but commercial HMO mortgages are also used when a property falls outside standard residential HMO lending because of its size or structural complexity.
Lenders that accept HMO properties in this category usually assess rental calculation more closely, making rental yield a significant component of the property valuation.
Small HMOs are covered under property Use Class C4. This covers the planning rules for the building and includes considerations such as fire escapes that do not appear in Use Class C3 for family homes.
Large HMOs move into a Sui Generis Use Class, literally ‘of its own kind’. These are considered on a case-by-case basis for planning, licensing, and council approval.
This shift from C4 to Sui Generis affects planning considerations as well as the range of mortgage products available.
Properties that have a mixed use blur the line between residential and commercial. A building that has both commercial and residential applications, such as a shop with a shared facility HMO above it, or a pub that also has a multiple-tenant living space, must be considered within both commercial and residential rules.
For mortgage lenders this creates complexity and typically requires a commercial HMO mortgage, even when the residential side of the rental property would not be considered a large HMO. If there is more than one household, comprising three or more tenants, then it is a house in multiple occupation - add the commercial aspect and it becomes a mixed-use HMO for which a commercial HMO mortgage is used.
Where commercial or mixed-use space is being converted to residential HMO use, lenders will also check regulatory requirements. For example, planning permission for change of use is typically required, and they will want to see evidence that it has been granted.
Landlords and investors working in a limited company structure with an expanding property portfolio often utilise commercial HMO mortgages. These provide the flexibility and potentially higher valuations that maximise purchasing power and reduce unnecessary costs.
With support from specialist lenders, a commercial investment in HMOs can provide strong rental yields, ongoing portfolio growth, and long-term returns.
One of the key differences between a commercial HMO mortgage and a standard HMO mortgage is in regard to the property valuation. Rather than a basic market price valuation used for small HMOs, commercial HMOs are typically evaluated using an MV1 (Market Value 1) valuation.
This represents the difference between a residential valuation that is based purely on comparable sales in the area - the ‘bricks and mortar’ value of the building itself - and a commercial valuation that sees the property as an income-producing asset based on its rental yield and business performance.
MV1 is calculated considering:
The valuation process will affect:
Frequently, commercial HMO mortgages are used by professional landlords to refinance a bridging loan that has been used to purchase and convert an existing property to become a large HMO.
In these situations, HMO bridging finance is used to facilitate a purchase that provides a profitable opportunity. Once the conversion is complete, a commercial HMO mortgage settles the balance of the bridging loan, moving the structure from short-term finance to long-term funding and monthly repayments.
At Clifton Private Finance, our bridging and commercial mortgage teams work side-by-side to ensure a smooth handover from bridging and development finance into a pre-arranged commercial HMO mortgage.
If you are at the pre-purchase and conversion stage, you can discuss the opportunities offered by bridging finance with our HMO specialists.
At Clifton Private Finance, our business mortgage experts are here to give you the expertise you need to undertake a strategic HMO purchase.
With access to the wide UK network of specialist commercial mortgage lenders, we can help you compare options, exploring the full HMO mortgage market to secure the best deal and find the right HMO lenders for you.
Our team brings extensive experience in the commercial HMO mortgage market, with broker-led support tailored to complex cases.
As your funding partner, we offer:
Book a consultation with a Clifton Private Finance adviser today.
I approached Clifton Private Finance to help me get a mortgage as an Expat working in the Far East. I would normally 'cut out the middle man' on something like this and try to get myself a deal directly with the banks, but I am now sold on the broker concept and wouldn't hesitate to use Clifton Private Finance again. There were a number of complicating factors such as being an expat, the stamp duty holiday, the sheer amount I wanted to borrow and the fact I wanted it all wrapped up before the Stamp Duty holiday ended. It is clear to me now that the relationship that brokers have managed to foster with their banks means they can simply pull levers and make stuff happen that us ordinary folk cannot. Put simply, they are worth every penny, will take most of the stress out of the lending process, and seem to have access to deals that you just won't find on the internet. Thank you George and Jan for all your hard work!
James M
Luther was excellent. Very clear in his advice and explanations of products and was able to move things on very quickly when we ran into difficulties with the estate agents. Without a doubt I would recommend Luther to all friends, family and colleagues. Luther was a joy to deal with and took a lot of the stress out of a troublesome transaction, from my end. I would view Luther as real asset to Clifton Private Finance Ltd.
William W
The team at Clifton Private Finance has been outstanding, not only in helping me to obtain a mortgage on a slightly unusual home, but also in continuing to provide support and liaise with the lender and solicitors through to completion. Thank you for making the process of buying my first home much easier.
Chantelle S
Sam O'Neill, and the new lender he identified for me, worked tirelessly together using my time constraints, to make sure my mortgage application was completed on time. They are a brilliant company to work with, fast, efficient, open and transparent from the very beginning, and turned a seemingly impossible situation into a viable one. Sam was brilliant throughout the whole process and I would highly recommend him, and his colleague Helen, to anyone without hesitation, I cannot speak highly enough about them.
Myr B
I was incredibly lucky to find Clifton Private Finance after a search on line as their service has been more than exemplary. My point of contact was Sam 0’Neill and he was happy to help at every stage during the application of the bridging loan, making a stressful process much easier to deal with. He was always available by phone or email and gave prompt answers to queries I had as well as always getting back to me when he said he would. That to me is excellent customer service and I cannot thank him personally or the company enough for the support they have given me.
C Jefferey
Adam cannot thank you enough for all your support throughout this arrangement. You have gone more than the extra mile to support us. Without you we would not have got our dream retirement home. You have been most professional and personable. Liz and I would be more than happy if you wanted to use us a reference with respect to any future clients.
Nigel & Liz K - Bristol
You have certainly shown me that you do everything for your clients, including tolerating their excessive emails and questions for updates. I have been kept in the loop, from yourself, about why the delays were occurring (Nationwide, post etc) which I would like to highlight that I really appreciated. I certainly will be able to recommend you to others as and when the need arises.
Mr Morris
I recently contacted Clifton Private Finance after a Google search for bridging finance providers and was immediately struck by their efficiency and support. Forms were emailed over almost immediately and the necessary finance was arranged within a few days. None of the other companies I contacted came close to their professionalism, and the quote that I eventually received was impressive. Thank you Adam, your help has enabled us to reserve the house that we wanted and I certainly recommend you to others.
Mr M. R. - Oxford
Absolutely brilliant. The service was first class, got everything sorted efficiently and were always friendly. Any fees were negligible compared to the service offered. Robert was particularly outstanding.
Charles N
My advisor, Robert, was very helpful in finding the mortgage to suit me. He kept me up to date throughout the process and dealt with any issues when they arose.
Rowena C
