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Limited company HMO mortgages
There’s a growing demand for flexible, high-yield rental properties, and an increasing number of landlords are paying attention to Houses in Multiple Occupation (HMOs) and Multi-Unit Blocks (MUBs), seeing them as a way to maximise investment returns. But, some landlords are taking this one step further, by pairing HMOs and MUBs with a limited company buy-to-let mortgage. By setting up a limited company – which is also known as a Special Purpose Vehicle (SPV) in this context – and securing an SPV mortgage, landlords have a tax-efficient, strategic way to scale their property portfolio.
At Everest Mortgages, we understand that SPV mortgages, HMO mortgages and limited company buy-to-let mortgages can all seem daunting. But, we’re on hand to ensure you
secure the right mortgage through the right structure, giving you the financial boost you need to take your portfolio to the next level.
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HMOs vs. MUBs
An HMO is a property that’s rented out by three or more tenants, all from different households. They share facilities, such as the kitchen or bathroom, but are separate tenants. HMOs are popular with landlords and property investors because they bring in higher rental yields than standard buy-to-let properties and rental income is spread across multiple tenants. If a room is empty and another tenant can’t be found, income still comes from the remaining tenants. HMOs tend to be found in areas with a strong demand for student and professional housing, and in busy cities.
A MUB is slightly different, as it’s a single freehold property that’s divided into separate, self-contained units. For example, a block of flats. Unlike an HMO, each unit within a MUB can have its own entrance, kitchen and bathroom. But, the whole block is owned as one, by the same landlord or investor. MUBs are popular because they result in a higher combined rental income and there’s less void risk. Much like an HMO, if one unit within a MUB is empty, the others still produce income.
What are limited company HMO and MUB mortgages?
As HMOs and MUBs are seen as being more complex properties, lenders won’t simply offer you a standard buy-to-let mortgage. If you want to buy an HMO or MUB, and you’re planning to do so through a limited company, you will need a specialist limited company buy-to-let mortgage. These are buy-to-let mortgages designed for properties with multiple tenants, or properties split into multiple, self-contained units, that are owned through a limited company.
As HMOs and MUBs are seen as more complex properties, lenders apply different criteria than standard buy-to-let mortgages, and even more if you’re purchasing through a limited company. This is why specialist lenders and mortgage brokers are essential, which is where Everest Mortgages comes in.
The role of an SPV in limited company mortgages
An SPV – which stands for Special Purpose Vehicle – is a limited company that’s set up specifically for the purpose of buying, owning and managing investment properties. It doesn’t trade in anything else, and the only activity is property rental or investment. By registering with Companies House, using the right SIC codes and appointing directors – more often than not, these are the property investors, including yourself – you can invest in properties and apply for mortgages. These are held in the company’s name, rather than being linked to you as an individual.
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Why investors use an SPV for MUB and HMO mortgages
Many landlords choose to structure their HMO or MUB property portfolio through an SPV, wanting to take advantage of the financial benefits and increased flexibility. By setting up a limited company that’s dedicated to property, you benefit from:
Potential tax-efficiency
As rental profits earned by an SPV are taxed at corporation tax rates, rather than personal income tax rates, you might have the chance to keep more of your hard-earned income.
Easier to scale your property portfolio
Buying properties through a limited company makes it easier to add new investors, release equity, hold multiple properties under one SPV and secure portfolio mortgages. This makes it easier to scale your property portfolio as a whole.
Well suited to HMO and MUB lending
Some lenders prefer lending to SPVs for complex property types because the limited company structure keeps finances separate, and they can assess rental performance rather than personal affordability.
Limited personal liability
As the limited company is the owner of the property, and the borrower of the SPV mortgage, any debts and claims stay within the company. This protects your personal assets.
Cleaner financial record
As your SPV only holds investment property, it’s a lot easier to keep your accounts organised and more appealing to lenders.
Who are limited company HMO and MUB mortgages best for?
- Experienced landlords who want to expand into high-yield properties, as HMOs and MUBs often produce stronger returns.
- Investors who want to build a portfolio through a limited company, as SPVs make long-term growth easier and more tax-efficient.
- First time corporate landlords looking for a structured approach to property investing.
- Landlords converting existing properties into HMOs or MUBs.
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How do limited company HMO and MUB mortgages work?
Though limited company HMO and MUB mortgages are a type of buy-to-let offering, they don’t work in the same way as traditional buy-to-let mortgages. This is because you’re not buying the property as an individual, you’re setting up an SPV and buying the property through the company.
Rental income stress tests
Whereas lenders usually look at your personal income and affordability when they’re assessing you for a buy-to-let mortgage, limited company MUB and HMO mortgages are different. Lenders usually want the rental income to cover the mortgage by between 125% and 145%, sometimes more.
Deposit requirements
Most lenders require you to have a deposit of between 20% and 30% for an SPV mortgage, and low deposit mortgages are harder to find. If you’re a first time landlord or you’ve only recently set up your SPV, lenders might want you to have an even larger deposit.
Landlord experience
Many lenders prefer HMO and MUB applicants who are applying through an SPV to have some rental experience, ideally in HMOs and MUBs specifically. There are lenders who will work with first time or less experienced landlords, and Everest Mortgages can help you to access them.
SPV structure checks
Before approving your SPV for a mortgage, lenders want to make sure everything about the limited company is above board. They will verify the correct SIC codes have been used, company registration, directors’ details and company bank accounts.
At Everest Mortgages, we work with specialist lenders who understand the appeal of buying HMO and MUB properties through a limited company structure, ensuring your investment is supported by the right mortgage from day one.
Frequently asked questions
Do I need to be an experienced landlord to get an HMO mortgage using an SPV?
No, not always. Though some lenders prefer applicants to have a few years of landlord experience behind them, especially for HMOs, some are willing to be flexible for strong applicants.
Is an HMO licence required before applying for a mortgage?
If the property you’ve chosen meets the criteria for a mandatory or local HMO licence, lenders will want to see a valid licence or proof that you have applied for one before approving your SPV mortgage application.
Can I buy a MUB through a newly created SPV?
Yes, and it’s something many landlords do. As your SPV is new, you could benefit from sharing evidence of deposits, a business plan and projected rental income with lenders, to offset your limited experience.
Are interest rates higher for SPV HMO and MUB mortgages?
Usually, yes. HMOs and MUBs are considered more complex and higher risk than standard buy-to-let properties, and SPV lending adds another layer of complexity. Lenders offset the risk by offering slightly higher rates.
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