Build it
Build it
Development finance
Ground-up, conversion and part-built schemes, from site purchase to exit.
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Development finance
Which cap binds, loan to cost or loan to GDV, and the real day-one equity.
Build to Rent development
Underwritten on stabilised yield and DSCR, not sales rate.
Mezzanine and stretched senior
The gap between senior LTC and what you can fund, and the true blended cost.
Heavy refurbishment and conversion
Where refurbishment stops being a bridge: structure, change of use, drawdowns.
Part-built and rescue finance
Valuing an unfinished asset when the contractor has gone.
Bridge it
Bridge it
Bridging finance
Short-term debt where the deadline, the asset or the exit will not wait.
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Purchase bridge
Completing before the money is in place: chain breaks, tight deadlines, unmortgageable stock.
Development exit finance
Off development debt at a lower rate, to buy sales time and release equity.
Auction finance
A 28-day clock, and what must be in place before the hammer falls.
Pre-planning and planning gain
Lending against current value with planning upside.
Below market value purchase
Day-one lending against open market value rather than price.
Second charge and capital raising
Raising against existing assets, and first-charge consent.
Light refurbishment finance
Bridge plus refurb tranche, and where the development boundary sits.
Also structuredBridge to let and refinance
Hold it
Hold it
Mortgages and term finance
Long-term debt against income, once the asset is built, let or trading.
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Buy to let mortgages
ICR stress testing, limited company against personal, portfolio rules.
HMO mortgages
A higher cover test, licensing, and the two valuations a lender takes the lower of.
Commercial term, investment
Tenant covenant and lease term, and why DSCR sets the loan.
Commercial term, owner-occupier
Trading accounts and EBITDA rather than rent roll.
Portfolio refinance
Cross-collateralisation, and one facility against individual loans.
Stabilisation and term refinance
The income test replacing the GDV test, and the letting void before term debt engages.
Co-living and PBSA
An operational asset valued on income, and the operator covenant.
Run it
Run it
Business finance
Funding the business behind the property, secured on the ledger, the equipment or the covenant.
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How we work
Case studies
Articles
Tools
Development finance calculator
Size the facility against site cost, build cost and GDV.
Development exit calculator
Refinance the development facility and release equity at PC.
Bridging finance calculator
What a bridge costs, and what actually clears on day one.
Refurbishment finance calculator
Fund the purchase and 100% of the works, with interest rolled to exit.
BTL rental cover calculator
The rent a buy to let must achieve to clear a lender's cover test.
Commercial mortgage calculator
What a commercial property's income will support, and what it costs.
About
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Hold it › HMO mortgages
A house in multiple occupation earns more per square foot than the same house let to one family, which is the whole point of it. Lenders know that, and they price the extra management and the extra void risk into a higher interest cover test than a standard buy to let. The figure varies a good deal by lender and by how you hold the property.
The second difference is the valuation, and it catches people out. A valuer will usually produce two figures, the bricks and mortar value as an ordinary house and the investment value based on the rental income. Which one a lender uses varies by lender and by size: smaller HMOs are commonly valued as ordinary houses, and some lenders lend against the lower of the two. So the yield that makes the deal work may not be the number the loan is sized on.
Then there is permission. Five or more occupants forming two or more households needs a mandatory licence, many councils run additional licensing below that, and an Article 4 direction removes the permitted development right to convert, so planning is required where it otherwise would not be. Getting that order wrong is the most expensive mistake available here.
Set the cover your lender applies and see the rent an HMO has to clear.
Both valuations anticipated
We establish early whether a lender will work from bricks and mortar or investment value, because on a larger HMO the gap between the two decides whether the purchase funds at all.
Licensing and Article 4 checked before an offer
Mandatory licensing, additional or selective schemes, and whether the property sits under an Article 4 direction. A lender will ask, and an unlicensed property in a licensing area is a decline rather than a condition.
Room count matched to the lender
Up to six rooms is a broad market. Above that the lender list shortens sharply and pricing moves, so knowing where the property sits in that band before you offer is worth more than a rate comparison.
Cover tested on the rent a valuer will accept
Not the gross room rate. Bills included, voids and management all sit between the advertised rent and the figure a lender will count towards its cover test.
Which lenders play here
Specialist buy to let lenders and a number of building societies, with sharply different appetites by room count, by whether the property is licensed, and by whether you have run an HMO before. First time HMO landlords are a narrower market than experienced ones, and it shows in both leverage and price.
5+
Occupants, mandatory licence
6
Residents, the small HMO class
5 yrs
Longest licence
6
Rooms, where the market narrows
Indicative, and not an offer. What a lender will actually do depends on the scheme, the borrower and a full valuation.
What to have ready
Bring these and we can tell you where you stand.
Each one is something a lender will ask for. Having it early is the difference between a fast answer and a slow one.
✓The property, the price, and the room count and layout
✓Achieved or projected room rents, and whether bills are included
✓Licence status, and which scheme the council operates
✓Planning position, including any Article 4 direction in the area
✓Your experience of running an HMO, if any
✓Ownership intention: personal or limited company, and the reasoning
Related
Worth reading on this
Next
Related in this pillar.
Common questions
The questions this product raises.
Do I need planning permission to turn a house into an HMO?
Often not, for a small HMO. Changing a house to an HMO for up to six residents is permitted development in England. But a council can remove that right for an area with an Article 4 direction, and in some cases the direction takes effect straight away. Then you need planning permission. Check the council's current position before you offer, not an old search. Above six residents it is outside the small HMO class, so do not assume the right applies.
Do I need an HMO licence?
Yes, if it is let to 5 or more people from more than one household, with shared facilities, and at least one tenant pays rent. Smaller HMOs may need one too, depending on the area, so check with the council. The rules cover England and Wales. A licence lasts at most 5 years, and renting out an unlicensed HMO can mean an unlimited fine. A lender will ask for the licence, and an unlicensed property in a licensing area is a decline rather than a condition.
How will a lender value my HMO?
It depends on the lender and the size. For smaller HMOs, a lender commonly values it as an ordinary house, on its vacant possession value. For larger HMOs, some lenders will use an income based valuation, but not all offer one. Ask early which basis applies, because on a larger HMO the gap between the two can decide whether the purchase funds.
What rent cover will an HMO lender ask for?
It varies a lot by lender and by how you hold the property. HMO tests are usually higher than on standard buy to let, but lenders differ widely, and the figure changes as they update their criteria. Run the rent against the lender's own test early, not a market average.
Bring us the detail.
Send what you have. We will tell you what is fundable and what needs work before anyone approaches a lender.
Specialist property finance for developers who want the numbers to survive underwriting.
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Fundingwise Limited is not authorised or regulated by the Financial Conduct Authority, and arranges unregulated finance only. That means lending secured against commercial property, or against residential property that is not, and will not be, occupied by the borrower or an immediate family member as a main residence. We do not advise on or arrange regulated mortgage contracts or regulated bridging loans. Because this finance is unregulated, FCA conduct rules and access to the Financial Ombudsman Service do not apply. Fundingwise Limited is registered in England and Wales, company number 13750788.