Bridging finance for HMO conversions

Why HMO projects benefit from bridging

Converting a property into a House in Multiple Occupation is one of the most effective ways to lift rental yield. Multiple tenancies diversify income and reduce the impact of a single void. The challenge is timing and cashflow. Standard buy-to-let mortgages rarely fund properties mid-renovation or cover the full cost of works, so projects stall, bargains are missed, and licensing takes longer than it should.

Bridging finance provides a short-term solution designed for speed and flexibility. Decisions in principle can be issued the same day, funds can land in days, and even unmortgageable properties can be purchased while they lack kitchens, bathrooms, or fire safety upgrades. Typical terms run 3 to 24 months, with loan sizes from £30,000 to £30 million. With additional security, loan-to-value can reach up to 100%, and lenders often fund 100% of refurbishment works. Interest can be serviced monthly to manage costs or rolled up so cashflow is preserved during the build phase.

Pricing is competitive in 2025. Specialist bridge rates start from around 0.75% for HMO-focused lenders, while market averages have dipped to roughly 0.81% per month. Where the project plan is tight and the exit is clear, these numbers can make sense when weighed against the uplift in value and income once an HMO licence is granted and rooms are tenanted. The exit is typically a refinance to a long-term HMO mortgage, potentially with the same lender on a bridge-to-let pathway to save time and fees.

In short, bridging helps UK landlords secure the property, complete the full conversion to compliant HMO standards, and refinance onto a stable product without waiting for cash reserves to build. It is a practical, time-sensitive tool for England, Scotland, Wales, and Northern Ireland where demand for shared accommodation remains resilient.

Who gains most from this route

Landlords and investors aiming to convert a single dwelling into a compliant HMO benefit the most, particularly those buying at auction or below market value. First-time HMO investors can use bridging to fund essential fire doors, partitions, extra bathrooms, and kitchen upgrades, then refinance once the uplift is proven. Experienced operators can leverage additional security to maximise loan-to-value and scale portfolios faster. It also suits limited companies that need a flexible facility during refurbishment, as well as borrowers tackling properties considered unmortgageable until works are finished.

Funding routes you can consider

1. Standard bridging for purchase only - quick completion to secure a deal, then self-fund works.

2. Refurbishment bridge - funds both acquisition and 100% of works, often based on GDV.

3. Bridge-to-let - pre-agreed exit to an HMO mortgage with the same lender for a faster switch.

4. Second-charge bridge - release equity from another property to push total LTV up to 100%.

5. Auction bridge - accelerated legals and funds in days to meet strict auction deadlines.

Cost, impact, returns and risks

What lenders look for

Eligibility ultimately turns on the strength of your plan and the clarity of your exit. Lenders assess purchase price, GDV, borrower experience, credit profile, and available security. They want confidence that the HMO will meet local licensing standards, including room sizes, fire safety, and amenity requirements for your council area in England, Scotland, Wales, or Northern Ireland. Properties deemed unmortgageable during works are acceptable on a bridge, provided the schedule and costs are documented.

Expect questions about your contractor capacity, planning position, and whether the layout supports the target room count. A contingency allowance is viewed positively. Loan-to-value must sit within policy, which can be expanded with a second charge on another property. For exit, a refinance to an HMO mortgage is typical, and a bridge-to-let pathway with the same lender can compress timescales and reduce fees. Kandoo can help you package an application, compare lenders that fund 100% of works, and line up the refinance early so deadlines are met without drama.

Step-by-step timeline

1. Get a same-day decision in principle from a specialist.

2. Instruct valuation, legals, and initial survey of works.

3. Finalise itemised budget, timeline, and contingency.

4. Complete and draw down funds for purchase and works.

5. Deliver refurb to HMO standards and pass inspections.

6. Revalue and refinance onto an HMO buy-to-let.

Pros, cons and key considerations

Plan before you commit

A successful bridge is built on planning. Start with council licensing guidance so your specification meets room-size, amenity, and fire safety requirements. Lock in a detailed, fixed-price works schedule and include a contingency of at least 10%. Confirm contractor capacity and access to materials, especially where fire doors, partitions, and additional bathrooms are involved. Pre-qualify your exit by testing rental demand and achievable room rates in the area, then sense-check the refinance against realistic valuation assumptions. Where possible, keep the same lender for a bridge-to-let route to reduce duplicate valuations and legal fees. Finally, monitor your timeline weekly. If delays appear, communicate early with your lender and broker to adjust drawdowns, interest treatment, or term.

Alternatives you might weigh up

1. Further advance or remortgage on an existing property to raise deposit funds.

2. Development finance for heavier structural works beyond typical refurbishment.

3. Joint venture equity to reduce leverage and share risk and returns.

4. Cash purchase followed by refurb and later refinance to HMO mortgage.

FAQs

Q: Can a bridge fund an unmortgageable property during works? A: Yes. Bridging is designed to fund properties lacking facilities or in poor condition, provided the works schedule and exit are credible.

Q: How quickly can funds be released? A: A decision in principle can be same day, with drawdown in days. Most cases complete within two to four weeks depending on valuation and legals.

Q: What interest options are available? A: Lenders commonly offer serviced interest to manage monthly cost or rolled-up interest to preserve cashflow until refinance.

Q: How much can I borrow for HMO conversions? A: Typical ranges are £30,000 to £30 million. With additional security, total LTV can reach up to 100%, and many lenders fund 100% of refurb costs.

Q: What is a bridge-to-let exit? A: It is a pre-arranged switch from the bridge to a long-term HMO buy-to-let, often with the same lender, reducing fees and speeding completion.

How Kandoo helps you move faster

Kandoo is a UK-based retail finance broker with access to specialist HMO bridging lenders. We compare terms, model true total cost, and package your application to meet underwriting standards. Our team can set up a bridge-to-let exit early, coordinate valuations, and help you move from purchase to licence and refinance with minimal friction.

Important information

This article is for information only and does not constitute financial advice. Bridging loans are secured against property and may be at risk if repayments are not met. Seek independent advice and check local licensing requirements before proceeding.