Funding a HMO Conversion with Bridging Finance.
If you are converting a standard buy-to-let into a House in Multiple Occupation (HMO), bridging finance is often the fastest and most flexible funding option. Here is a clear, step-by-step breakdown of how it works and how to use it properly.
Up to 85% LTV day one. Rates from 0.39%. No licence required at completion. Ideal for HMO acquisitions and value-add projects.
What Is Bridging Finance for HMO Conversions?
A HMO Bridging Loan is short-term funding (usually 3-18 months) used to:
Buy an unmortgageable property or property which requires modernisation
Fund refurbishment works
Convert to an HMO (House of Multiple Occupation)
Refinance onto a long-term HMO mortgage once complete
It bridges the gap between purchase and refinance or sale. Learn more about our HMO Bridging Loans here.
When Bridging Finance Makes Sense for HMO Projects
Bridging is ideal when:
The property is not mortgageable in its current condition
You need to complete quickly (auction or off-market purchase)
You are changing use class or internal layout
You need refurbishment funds rolled into the loan
You plan to refinance onto a commercial or specialist HMO mortgage
Typical HMO Bridging Loan Structure
Most lenders structure deals like this:
Loan Amount
Up to 70-85% of purchase price. Some lenders will offer 95% LTV if purchasing below market value (BMV).
Up to 100% of refurbishment costs (released in stages)
Usually capped at 65-70% of Gross Development Value (GDV)
Term
6-12 months standard
Extensions sometimes available
Interest
Rates strart from 0.39% per month. The average rate for most HMO conversions is to 0.65% to 1.2% per month - depending on the level of risk.
Often retained (rolled up) so no monthly payments
Fees
Arrangement fee: 1%-2%
Exit fee: sometimes 1% (not always)
Legal and valuation costs
No broker fees
Step-by-Step: How to Fund an HMO Conversion
Step 1 - Secure The Property
Most investors use bridging to:
Buy run-down houses
Acquire auction stock
Purchase properties unsuitable for standard mortgages
Important: Have your exit strategy clear before completion.
Step 2 - Planning and Licensing Strategy
Before applying:
Check local council HMO licensing rules
Confirm Article 4 restrictions (if applicable)
Understand minimum room sizes and amenity requirements
Many lenders will want confirmation that licensing is achievable.
Step 3 - Submit Your Bridging Application
You will normally need:
Purchase price and completion deadline
Schedule of works and budget
Expected end value (GDV)
Refinance or sale exit plan
Experience summary (or professional team details)
Step 4 - Valuation and Offer
The lender will assess:
Current market value
End value as an HMO
Project viability
Local rental demand
If approved, you receive a formal loan offer.
Step 5 - Drawdown and Works Release
Funds are usually structured as:
Day 1 advance for purchase
Refurbishment funds held in retention
Released in stages after inspections
This protects both borrower and lender.
Step 6 - Refinance Onto HMO Mortgage
Once works and licensing are complete:
Apply for specialist HMO mortgage
Valuation based on rental income
Loan repays bridging finance
Investor pulls capital out and holds long-term
Key Risks to Manage
Licensing Delays
Councils can be slow. Build time buffer into your loan term.
Cost Overruns
Always include:
10%-15% contingency
Professional quotes
Realistic timelines
Exit Risk
Your refinance must stack up:
Rental income coverage
Valuation expectations
Mortgage stress testing
How Experienced Investors Optimise HMO Bridging
Smart operators usually:
Retain interest (no monthly payments)
Use desktop or AVM valuations where possible
Structure loans at lower LTVs for speed
Use staged drawdowns for refurb control
Line up refinance lender before purchase
If you are acquiring or refurbishing an HMO, our HMO Bridging Finance solutions are designed for fast completions, licence-in-progress cases, and value-add strategies.
When Bridging Is NOT Suitable
Bridging may not work if:
Exit mortgage is not achievable
Rental income is marginal
Licensing is uncertain
Project timeline exceeds 18 months
Budget is too tight
Quick Checklist for Landlords
Before buying or refinancing an HMO:
Confirm if licensing is required locally
Check current licence status
Review room size compliance
Inspect fire safety setup
Confirm planning use class if relevant
Factor licence costs into cashflow
Final Thoughts
HMO bridging finance is a powerful tool when structured correctly - allowing investors to move quickly, unlock uplift through conversion, and refinance onto long-term rental funding once stabilised.
The difference between a smooth project and a stressful one usually comes down to preparation. Submitting a complete, lender-ready application pack reduces underwriting delays, improves pricing outcomes, and increases approval certainty. Clear licensing strategy, realistic budgets, and a credible refinance exit will always strengthen your case.
If you are planning an HMO acquisition or conversion and want to explore funding options, view our dedicated HMO Bridging Loan options page to see current structures, LTV limits, refurbishment funding availability, and typical completion times:
Our team at Aura Capital specialises in fast, flexible HMO bridging solutions designed around real-world project timelines - from light refurb conversions through to full multi-unit upgrades.
If you would like help structuring your deal or preparing a lender-ready submission pack, get in touch and we will guide you through the process.
