As landlords increasingly turn to houses in multiple occupation (HMOs) to maximise rental yields and help mitigate risk exposure across their portfolios, it’s no surprise that we, and our intermediary partners, are seeing a sustained uplift in this type of business. With higher potential returns but differing criteria from lender to lender and contrasting approaches from local authorities, understanding the nuances of HMO financing is crucial to ensuring a smooth application process and avoiding unnecessary delays.
Key challenges in HMO applications
As a lender who is vastly experienced working with this particular property type, we’re comfortable talking HMO on any level. However, we also fully appreciate the challenges for intermediaries and their clients, especially if requirements are not correctly met from the outset.
So, lets focus on overcoming any initial obstacles.
One of the most common pitfalls is miscommunication around property classification and licensing requirements. Many converted HMO cases focus solely on whether a licence can be secured within 90 days of completion or needs to be in place before an offer is issued. However, lenders also need clarity on the property’s current use.
For example, is the property already operating as an HMO, or is it a single dwelling being converted? If brokers fail to flag this early, such as by not correctly selecting the property’s status in lender portals, underwriters may only discover discrepancies later in the valuation process. This can lead to delays or, in some cases, revised lending decisions.
To avoid this, brokers should ensure that the following key aspects are clearly documented upfront:
• Fire safety compliance – Confirming the property meets HMO fire regulations can prevent post-valuation issues.
• Room sizes and layout – Some properties may not qualify if rooms fall below minimum size requirements.
• Planning permission and licensing – Ensuring the correct permissions are in place before submission speeds up approvals.
Uploading supporting documents, including notes from discussions between brokers, landlords, and business development managers (BDMs), can help underwriters take a proactive rather than reactive approach. This not only accelerates processing times but also reduces the risk of surprises post-valuation.
Expanding finance options for complex HMO investments
As landlords seek to further diversify their portfolios, there are also regional implications to consider. The latest Lendlord HMO Data Analysis Report for Q4 2024 highlights key investment trends across the UK, revealing a clear North-South divide in property values and rental yields.
• Highest HMO yields: North East England offers the strongest returns, with an average yield of 10.4%.
• Highest property values: Greater London leads in property prices, averaging £660,227 per HMO. However, yields are lower due to the high initial investment.
• Highest rental income: South East England generates the most rental income, averaging £46,041 per year, ideal for landlords seeking a balance between cash flow and capital value.
The role of intermediaries in securing the right HMO finance
For brokers, a clear understanding of individual lending policies and accurate application submissions are essential in securing the best financing solutions for landlord clients. Our recently introduced HMO Plus product range is designed to support landlords with complex property types that may not fit standard lender criteria. This includes accepting first-time landlords for HMO products, offering commercial valuations for small complex HMOs, and providing greater flexibility in financing larger HMO investments. By expanding these options, landlords can diversify their portfolios and explore a broader range of HMO opportunities with confidence.
By partnering with specialist lenders who offer tailored underwriting for more complex cases, intermediaries can help landlord and investor clients navigate the buy-to-let market with greater certainty. With high-yielding HMO opportunities continuing to emerge across the UK, staying informed on financing options and avoiding common pitfalls for this property type will be key to maintaining robust business volumes throughout 2025.
