Limited Company HMO Mortgage

What if the limited company has poor credit? Could I still get a HMO mortgage?

Yes, you can. You can check your limited company’s credit score on Experian under the business side as opposed to personal credit.

If you’ve got poor credit in the company name, it’s useful to understand what’s happened and work through that. If it’s your personal credit, we have to cover that off as well. It’s all about understanding what happened, why and how we tell a bank that story so they understand and accept the risks.

Can I remortgage my HMO properties into a limited company? How does this work?

Yes, you can. There are several steps to this process. From the client’s point of view, you’re just moving your property from your personal name to a limited company. If this is a fully fledged business and you manage multiple properties on a full-time basis, you may qualify for corporation relief. This allows you to move the properties across to the limited company without paying stamp duty and capital gains tax.

For most people, it’s quite hard to get qualified for that. More often, moving a property from personal to limited company is a sale and a purchase. You sell it and your company has to buy it at full market rate. If it’s a £100K property, you can’t just sell it for £50K to save some stamp duty, it has to trade at full market value.

It’s going to have full stamp duty, and there’s likely to be a capital gains tax liability if you’ve owned it for some time. So just be mindful of that.

Other than that, the mortgage process itself is very simple. We do it as a purchase mortgage rather than a refinance, but the banks understand that it’s an incorporation, so the process runs smoothly. It’s the usual process of a Decision in Principle, mortgage application, legals, valuations, and completion. But there’s no chain so it’s pretty quick.

Is it worth buying an HMO property? What are the pros and cons of an HMO mortgage through a limited company?

You’ll have a higher rental yield for a HMO than on a standard property, which means your personal profits could be higher. So that’s obviously a pro for HMOs.

Buying through a limited company gives you tax benefits, because the company will pay corporation tax at 25%. Personally, you’ll pay the marginal rate. If you’re a higher rate taxpayer, that’s 40%, or at the additional rate, 45%, which can be quite costly on your profit margins.

In terms of the cons, HMOs are more regulated, there are fewer lenders and the products are more expensive. It comes down to the risk. The tenants you have in a standard Buy to Let might be professionals or young families, who tend to look after the property they’re in.

With HMOs, people tend to take a little bit less care because they’re paying less individually per month for that property. That means there’s a higher risk of damage or it being left in a poor state when they leave. You then have to cover off refurbishing or cleaning that property.

There are higher costs associated with HMO, plus with higher tenant turnover you have to market and let the property more frequently than a standard Buy to Let, so there are more costs on that side as well.

There are slightly fewer lenders, and those lenders products’ are more expensive than a standard Buy to Let. So although you’re earning more money and the yield is higher, there are more associated costs.

It’s still more profitable than a Buy to Let, but there’s a bit more headache with it too, so just bear that in mind.

Are HMO mortgages more expensive for a limited company? What other costs are involved?

Mortgages for HMOs aren’t more expensive through a limited company. An HMO product, for the most part, is the same whether it’s a limited company or personal ownership. The differences will come down to the rental calculations. The tax position being better for a limited company means your rental calculations will be better than the personal ownership route if you’re a higher rate or additional rate taxpayer.

Borrowing is easier via a limited company for most HMOs. There are higher interest rates and arrangement fees, typically 1% to 2%, because lenders have come up with some very creative products. With inflation over the last few years, rates have gone up. Banks have been creative in offering high fees but low rates. It nets out the same in the end [information correct at the time of recording in July 2025].

Legal fees tend to be similar to Buy to Let, but valuations are a bit more expensive – perhaps a couple of hundred pounds more. Lastly there are licensing fees. Some areas do require licensing for HMOs, which will depend on whereabouts in the country you are, and the costs vary by location.

How do I get an HMO mortgage as a limited company? What’s the process, and how can a mortgage broker help?

First, set up a Special Purpose Vehicle limited company, if you haven’t already. Then speak with a broker, because almost all the HMO lenders are broker only.

Your broker then can help you choose the correct lender and product, help you with business plans and various other parts of the application. We run through that application process for you: Decision in Principle, full mortgage application, valuation, offer and legals.

We help manage all those aspects and take away the stress of you having to do it. We’ll hopefully get you through to a pretty swift completion.

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.