Product Criteria

House in Multiple Occupation (HMO)

A HMO is defined as a property rented out to at least 3 people who are from more than 1 ‘household’ and share facilities like a bathroom and kitchen.
What we consider:
  • Small HMOs (up to 6 beds) - Max 75% LTV based on market value or market value with vacant possession, whichever is lower (plus fees).
  • Large HMOs (7 to 20 beds) - Max 70% LTV based on market value (plus fees).
  • HMO landlords with experience of this property type for a minimum of 12 months and a track record of suitable letting, renewing, and maintaining these properties. 
  • All planning and licensing requirements must be complied with.
  • The property should be well-located with strong and sustainable tenant demand and liquidity.
  • The property should meet the Decent Homes Standards and not be in poor condition.
  • Properties should be let on a furnished basis.
  • Net rental income must be able to cover the required ICR thresholds calculated using the required ICR stress rate (130% Corporate & 150% Personal).
  • Maximum YBS HMO exposure (excluding fees) - £10m on an aggregated basis. 
  • Maximum loan per HMO property - £3m.
  • A maximum of 20 bedrooms per HMO property.
  • HMO landlords with experience of this property type (min 12 months), but not overly exposed to it.  This is because specialist knowledge is needed, but we don’t want to be too restricted to changing markets.
  • All licensing requirements should be complied with – as we take the legislation to protect tenants seriously. 
  • Located where there are other HMO properties and demand is consistent and sustainable – as long term viability for all is key.
  • Not geographically concentrated – we don’t want the customer or ourselves to be reliant on a single area.
  • Properties should be furnished – as this is what tenants expect and is how to operate successfully in this sector.
  • Rental income, excluding any bills included, should meet a higher ICR threshold of 150%, at the appropriate product stress rate. This is because bills are often included for simplicity of the letting, rental income per property is higher, as usually are costs of operation.
  • £5m maximum lending on HMOs and £1.5m max per property – this is to cap the exposure to what we think are responsible levels for all involved.
What we won’t do:
  • HMO properties with more than 12 bedrooms – as these are considered too large for our credit policy, and also require much more intensive management.
  • HMO properties used for local authority emergency accommodation, probation or rehabilitation – again these are seen as too specialist.

Check our product criteria

Find out more about our risk appetite before you apply. 
 

Investment criteria

View our criteria for industrial, offices, leisure and retail sectors.

How to apply

Check out our useful guides and find out more about our processes and support that we offer. 

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