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incorporation of student HMO

Incorporation of Student HMO Above Commercial into SPV Limited Company

The Clients: An experienced landlord couple with a portfolio of 22 buy to let properties. Following a recommendation from their Tax Adviser, they wanted to incorporate their personally owned properties into an SPV Ltd Company. Due to their financial circumstances, the couple would benefit from incorporation relief.

The Property: Situated over a commercial property on a busy high street, the four-bedroom HMO flat was let out to students. Due to the small number of bedrooms, it did not require an HMO licence.

The Finance: Following their tax adviser’s recommendation, our clients required a Ltd Company buy to let mortgage to purchase the property and complete the incorporation. In the process, they wished to release some of the equity as a deposit for their next buy to let purchase.

The Challenge: The primary challenge with this case was the location of the HMO. Situated directly over a commercial premises, and close to a pub, it limited the lenders we could approach. Furthermore, we were concerned that even the lenders who would consider the property may restrict LTV to 65%, which would reduce the amount our clients could capital raise for an onward purchase.

We also required a lender that would accept the small HMO with no licence, the student tenants and a capital raise with no agreed onward purchase. Collectively, the multiple criteria requirements of this case meant it was far more complex than it initially appeared for our clients.

The Solution: Using our extensive knowledge of the specialist buy to let lender market, and reviewing criteria in our bespoke sourcing system, we approached a lender that assesses client’s situations on a case-by-case basis. A formal mortgage offer would depend on the valuer’s comments about the property. This often comes down to the ‘sight, smell and sound’ test for properties located in town centres. For example, if the nearby pub was exceedingly noisy, this could impact resale potential in the future, making it a high risk for a lender.

Fortunately, the valuer was confident that the surrounding commercial properties would not impact the resale of this small HMO, and the lender was happy to offer a full 75% LTV limited company buy to let mortgage. Our clients were thrilled that they would now benefit financially from the new ownership structure and had the funds to put down as a deposit on their next purchase. Here are the details:

Property Details

Property value: £350,000

Loan amount: £262,500

LTV: 75%

Rate: 3.79% 5-year fixed

Term: 25 years, interest-only

Mortgage payment:  £841 per calendar month

Lender arrangement fee: 1.5% of the loan on completion (£3,937.50)

Rental income: £2490 per calendar month

Application: SPV Limited Company

Consultant: Agata Rogozinska, 01732 471602






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Mortgages for Business Ltd is authorised and regulated by the Finance Conduct Authority (No. 313537) to transact regulated mortgages. We are a credit broker, not a lender. We work with the whole of market in sourcing a lender for you; we may receive a commission from the lender, and this amount varies between lenders. The FCA does not regulate some investment mortgage contracts. Mortgages for Business Ltd is a founding member of the National Association of Commercial Finance Brokers, the body that promotes best practice within the commercial finance industry. Telephone calls may be monitored or recorded for training purposes.