HMO Mortgages (Houses of Multiple Occupancy)

A House of Multiple Occupancy (HMO) is defined as a single property that is let to 3 or more tenants who form 2 or more households* and share a bathroom, kitchen and toilet.

HMO Mortgages (Houses of Multiple Occupancy)*The term ‘household’ is defined as follows: 

  • Three friends or individuals living together would be classified as three households
  • A couple (married or living together) would constitute one household
  • Families or relatives living together constitute one household
  • A couple (married or living together) sharing with a friend or individual would be classed as two households

The main ‘categories’ of HMO include:

  • shared houses and flats 
  • lodgings  
  • hostels and some bed-and-breakfast accommodation
  • residential staff accommodation and halls of residence 
  • conversions of houses into self-contained flats

It is worth noting that each local authority has the power to alter this definition to suit their local requirements.  It is therefore advisable to check with the local authority in your area or the area you are looking to purchase in order to know what guidelines you are working to.

Useful Information:

A full list of UK council contact details can be found by following the link below:

Further information on definitions of HMOs can be found on the web site or

Information on Exemptions to the act are contained in Schedule 14 of the Housing Act 2004 and Schedule 1 of the Licensing & Management of Houses in Multiple Occupation and Other Houses (Miscellaneous Provisions)(England) Regulations 2006. 

HMO Licensing

Houses of Multiple Occupancy (HMO) have proven to be good sources of long term investment for buy to let landlords as they can yield high levels of rental return for the amount of money invested. These types of property are very popular with the following groups of people:

  • Students in university towns
  • Young working people to enable them to live closer to large cities
  • Low income, single working people


Whilst these types of property can make good investments, there is legislation in place which is mandatory and must be adhered to as a landlord in order to qualify for a licence and maintain it. 

In order to become a HMO landlord you will need to obtain a ‘Houses in Multiple Occupation’ licence. 

The price of obtaining a licence varies between councils from around £150 - £650+. Failure to obtain a licence could lead to a fine of up to £20,000.
To see how much a licence costs in your area, please contact your local council. 

Licensing has been introduced for HMO properties for 2 main reasons:

1. It is acknowledged that there is a significant risk of fire in HMOs compared to houses occupied by single families.

2. The standard of management in some HMO's has been found to be seriously deficient, such as to present a risk to the occupants and in some cases, anti-social behaviour to other residents and the neighbourhood.

What are the minimum standards required in order to obtain a HMO licence?

1.  The applicant must be a fit and proper person. The local authority will seek to establish whether the applicant has any unspent criminal convictions or whether there has been any history of problems relating to housing or the letting of housing.

2. The property will need to satisfy the local authority’s standards. In order to do this, your property will be put forward for an inspection which is normally carried out by an Environmental Health Officer / Technical Officer. For initial inspections, a member of the Building Control team may also be present. 

It is worth checking with your local council to determine the necessary requirements you need to fulfil in order to pass the inspection as this varies from region to region. 

The types of areas generally covered within the inspection include:

  • Means of Escape and other Fire Precautions such as the fitting of smoke alarms
  • Water supply and drainage in the house.
  • Gas and electricity supply
  • Shared areas of the house and installations
  • Facilities for the Preparation and Cooking of Food
  • Living accommodation.
  • Windows and ventilation.
  • Shared outbuildings and yards.
  • Health and Safety Rating System (HHSRS) including safety off appliances 
  • Management Standards


In addition to the above, the landlord must also:

  • Make suitable arrangements for disposal of refuse from the house
  • Display a notice in the house indicating your name, address and phone number
  • Give the local authority information about who lives in the house if requested


If you are looking to buy a property and obtain a HMO mortgage, make sure to do your research and see if there is sufficient demand for this type of housing in your area / chosen area.  Some areas have been saturated with buy to let and HMO housing which will mean lower monthly rentals due to competition and the likelihood of un-rented rooms.  

Good areas to look at are in university towns where students are looking for cheap accommodation.  When looking for a property, ensure it is well positioned, often in or close to the high street and easily accessible to all main amenities and transport links.  Places close to university campuses are also well sought after.

As a final port of call you will need tenants to occupy your property

There are numerous ways to find tenants but we have listed a few useful websites you may wish to have a look at:

The above companies are not provided as means of recommendation by Fairfield Finance.  We have provided links to these websites for reference purposes only.

For further information please contact us on

FREEPHONE 0800 587 4229, request a call back,

email, or complete an online enquiry form

The overall cost for comparison is 3.7% APR

The actual rate available depends upon your circumstances.

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