Limited Company HMO Mortgage
Scott West sets out how an HMO mortgage held through a limited company works, and where the structure earns its place.
Can I get an HMO mortgage through my limited company?
You can. It is now the route most landlords take. Many buy their HMOs inside a limited company for the tax treatment, which we cover below, and a good number refinance into one as well. The structure is well established and lenders are comfortable with it.
What criteria does a limited company need to be eligible for an HMO mortgage?
The company must be a UK registered limited company carrying the correct SIC codes, the codes that record what the business does. There are four or five that apply, and they all begin with 68. You need the right ones in place and the company in good standing, which matters most when the entity is newly formed.
The directors should ideally hold clean credit. Past credit issues do not rule you out, but they need to be disclosed and explained. Lenders also weigh your experience with HMOs, since these are not a first-time landlord product. The usual path is a couple of standard buy-to-lets first, then a move up to HMOs.
How much deposit does a limited company need for an HMO mortgage?
Most lenders look for a 25% deposit. A handful will lend to 80% Loan to Value, a 20% deposit, but those products are expensive and not straightforward to secure.
Treat 25% as the practical floor. Where you can put in more, the products move in steps: there are clear break points around 75% Loan to Value, 65% and 50%, and the rate improves at each. So a larger deposit can work in your favour, but if 25% is what you have, that is enough to proceed.
What's the benefit of getting an HMO mortgage instead of a buy-to-let through a limited company?
An HMO typically produces a higher rental yield, because you are letting individual rooms within a house rather than the whole house to a single tenant. The income is correspondingly higher.
On the tax side, a limited company can offset mortgage interest against profit, which personal ownership no longer allows. Both HMO mortgages and standard buy-to-lets held in a company gain materially from that structure.
Can I get an HMO mortgage under a limited company as a first-time landlord?
You can, though it is considerably harder. Many lenders want to see some landlord experience first, and the figure they tend to cite is six months. In practice six months tells them little, but it is the threshold they apply, and some set it at 12 months.
If you are an experienced landlord, most lenders will consider you for HMOs. If it is your first purchase as a landlord, an HMO is a tougher case, simply because you have not managed a single tenancy before, let alone four or five people sharing one house.
HMOs carry more management. Tenants tend to turn over more quickly, often because they sit on lower incomes, which is why they rent a room rather than a whole property. Some work in hospitality and move between jobs and locations.
That makes them a higher risk in a lender's eyes, on the view that such tenants may take less care of the property. Lenders prefer experienced landlords here, both for management and for the risk that comes with it.
What if the limited company has poor credit? Could I still get a HMO mortgage?
You can. You can check the company's credit score with Experian under its business reporting, which is separate from your personal file.
Where the company name carries adverse credit, it helps to understand what happened and work through it. The same applies to your personal credit. The task is to establish what occurred and why, and to present that to a lender clearly so it can assess and accept the risk.
Can I remortgage my HMO properties into a limited company? How does this work?
You can, and it runs in stages. From your side it looks like moving a property from your personal name into a company. If you run a fully fledged property business managing multiple properties full time, you may qualify for incorporation relief (Section 162), which can defer the capital gains tax that would otherwise arise. Stamp duty relief is a separate test — typically only available to genuine property partnerships — and both need specialist tax advice before you rely on them.
That relief is hard for most people to qualify for. More commonly, moving a property from personal to company ownership is a sale and a purchase: you sell, and the company buys at full market value. On a £100K property you cannot sell at £50K to reduce the stamp duty; it must change hands at full market value.
That means full stamp duty applies, and there is likely to be a capital gains tax liability if you have held the property for some time. Keep that in view.
The mortgage itself is straightforward. We arrange it as a purchase rather than a refinance, and because lenders recognise it as an incorporation the process runs cleanly: a Decision in Principle, the application, legals, valuation and completion. With no chain involved, it tends to move quickly.
Is it worth buying an HMO property? What are the pros and cons of an HMO mortgage through a limited company?
The yield on an HMO is higher than on a standard property, so your profit can be higher too. That is the central case for HMOs.
Holding the property in a company carries tax benefits, because the company pays corporation tax at 19–25% depending on profit. Held personally, you pay your marginal rate, 40% at the higher rate and 45% at the additional rate, which can take a meaningful share of your return.
Against that, HMOs are more heavily regulated, the lender pool is smaller and the products cost more, all of which reflects the risk. The tenants in a standard buy-to-let, often professionals or young families, tend to look after the property.
In an HMO, tenants paying less per month individually may take a little less care, which raises the chance of damage or a property left in poor condition. The cost of refurbishing or cleaning then falls to you.
The running costs are higher, and with greater tenant turnover you market and re-let more often than with a standard buy-to-let, adding further cost.
The lender pool is slightly smaller and those products price higher than a standard buy-to-let. So while the income and yield are higher, so are the costs that sit alongside them.
An HMO can still out-earn a standard buy-to-let; it simply asks more of you, and that is worth weighing before you commit.
Are HMO mortgages more expensive for a limited company? What other costs are involved?
No. An HMO product is, for the most part, the same whether held in a company or personally. The difference shows up in the rental calculations: the stronger tax position of a company means the rental assessment tends to work out better than personal ownership if you are a higher or additional rate taxpayer.
For most HMOs, borrowing is in fact easier through a company. Interest rates and arrangement fees sit higher, with fees typically 1% to 2%, because lenders have built their products that way. As rates rose with inflation over recent years, lenders responded with high fees against lower rates; the overall cost tends to net out much the same.
Legal fees are broadly in line with a standard buy-to-let, though valuations cost a little more, often a couple of hundred pounds. There are also licensing fees: some areas require HMO licensing, which varies by location, as do the costs.
How do I get an HMO mortgage as a limited company? What's the process, and how can a mortgage broker help?
Begin by setting up a Special Purpose Vehicle limited company if you do not already have one. Then speak to a broker, because almost all HMO lenders are broker only.
Your broker helps you select the right lender and product, prepares the business plan and supports the other parts of the application. We run the application for you, from Decision in Principle through the full mortgage application, valuation, offer and legals.
We manage each of those stages and take the work off your hands, with the aim of reaching a swift completion.
Your property may be repossessed if you do not keep up with your mortgage repayments.
Most buy-to-let mortgages are not regulated by the Financial Conduct Authority.
For specialist tax advice, please refer to an accountant or tax specialist.
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