Estimate what you can borrow against an HMO
Enter the rooms, the room rent, the property value and your assumptions. The calculator stacks the room rents into a gross rent, works out the gross yield, and shows an indicative maximum loan capped by loan to value and the rental stress test. Plain arithmetic on your figures, indicative only, not a quote.
The rooms produce £3,450 a month gross. Lenders lend the lower of the loan to value ceiling and what the rent will support on the stress test, so on these figures the indicative maximum is £337,500. Figures are an illustration on the numbers you entered, before voids, bills and running costs, and are not a quote or a valuation.
Calculator FAQs
How does the calculator work?
It is plain arithmetic on the figures you enter. It multiplies the rooms by the room rent to get the gross rent, then works out two limits on borrowing: the loan to value ceiling on the property value, and the rental stress test, where the rooms must cover the mortgage payment by your chosen interest coverage ratio at a stress rate. The lower of the two is your indicative maximum loan. It is a guide, not a quote, and it does not pull any live rate.
What is the rental stress test or ICR?
Lenders check the room rents cover the mortgage payment by a margin, the interest coverage ratio. As an indicative guide it runs around 125% to 145% depending on your tax band and the product, measured at a stress rate that can be above the pay rate. If the rooms clear that margin comfortably you can reach the loan to value ceiling; if not, the rent caps the loan below it. Change the ICR and stress rate to match a real quote.
What loan to value and rate should I use?
As an indicative guide, loan to value on an HMO runs up to around 70% to 75%, lower for first-time HMO investors or heavier conversions. HMO mortgage pay rates sit indicatively around 5.5% to 6.5% a year depending on the fix and leverage, and lenders stress at a rate that is often a little higher. These are assumptions you set, not live quoted rates. Nothing here is a rate offer.
Is the estimate a formal quote?
No. Every figure is indicative and depends on the lender, the property, the valuation, your experience and your circumstances. The room rents and the value are your own estimates. Send us the property for firm indicative terms, which are free and carry no obligation.