Can I get an HMO mortgage for a care home or supported living property?

Seeking finance for supported living or care home properties requires understanding the crucial legal and commercial distinctions between these types of accommodation and a standard House in Multiple Occupation (HMO). While these properties may house several unrelated individuals, their operational purpose and planning classification typically disqualify them from standard HMO mortgage products, requiring specialist commercial or institutional lending instead.

Can I Get an HMO Mortgage for a Care Home or Supported Living Property?

The short answer is typically no. While it might seem logical to treat a supported living facility or a small care home as an HMO, given that they house multiple, non-related tenants, mortgage lenders differentiate sharply based on the property’s primary function and its legal planning Use Class.

A standard HMO mortgage is designed for properties that fall under the C4 Use Class (small HMOs) or, in some cases, residential properties used as large HMOs, where the landlord simply provides accommodation. When a property transitions into providing care, support, or substantial services—as is the case with care homes or most supported living environments—it becomes classified as an institutional or commercial asset.

Understanding the Difference: HMO vs. Care Provision

To understand why standard HMO finance is rarely applicable, you must look at the legal definition of the property’s use.

What Defines a Standard HMO?

In the context of lending, a standard HMO (Housing in Multiple Occupation) is typically defined by:

• The primary purpose being accommodation, not care.
• Tenants renting individual rooms but sharing facilities (kitchen, bathroom).
• The property falling under Use Class C4 (3 to 6 tenants) or, for larger properties, remaining under residential Use Class C3 but subject to mandatory HMO licensing.
• The tenancy agreement being a standard Assured Shorthold Tenancy (AST) or similar non-commercial agreement.

Why Supported Living and Care Homes Are Different

Properties designed for care or supported living often fall under the C2 Use Class (Residential Institutions). This designation includes premises used for residential care homes, hospitals, boarding schools, and secure residential accommodation. This switch in Use Class is critical for lenders because it fundamentally changes the risk profile:

• Commercial Operation: The property is operating as a business providing services, not just residential rental income.
• Regulatory Oversight: Many such properties, especially care homes, must be registered and regulated by bodies like the Care Quality Commission (CQC), adding a layer of compliance risk that standard BTL lenders will not accept.
• Tenancy Type: Occupiers may hold licenses or bespoke tenancy agreements, not standard ASTs, impacting the lender’s ability to gain vacant possession if necessary.

Because the income stream is tied to the provision of care, support services, and specific commercial contracts (often with local authorities or housing associations), the necessary funding route is specialist commercial finance.

You can verify the official classifications through the UK Planning Use Class Order guidance.

Specialist Finance Solutions for Supported Living

If you cannot secure a standard HMO mortgage, you will need to approach specialist lenders who offer products tailored to commercial or institutional properties.

Bridging Finance: The Acquisition Tool

Many investors aiming to acquire a property for conversion into a supported living facility or care home initially use a bridging loan. Bridging loans are short-term, high-value loans designed to cover the gap between property acquisition and securing long-term funding or completing required renovations.

They are particularly useful when:

• A property needs substantial refurbishment or conversion works before it meets compliance standards for CQC registration or specialist BTL mortgage criteria.
• The investor needs to secure the property quickly (e.g., purchasing at auction or meeting a tight deadline).
• The property needs to be fully tenanted and operating commercially before a long-term commercial mortgage can be underwritten.

Lenders will rigorously assess your exit strategy. A strong credit history and clear business plan are essential components of any bridging application. To ensure you understand how lenders view your financial profile, it is prudent to check your credit file first. Get your free credit search here. It’s free for 30 days and costs £14.99 per month thereafter if you don’t cancel it. You can cancel at anytime. (Ad)

Important Risk Warning: Bridging finance is secured against property, and failure to meet the repayment terms can result in severe financial consequences. Legal action, repossession, increased interest rates, and additional charges are all possible outcomes if you default. Your property may be at risk if repayments are not made.

Commercial Mortgages for Long-Term Ownership

The long-term solution for supported living or care home properties is a commercial mortgage. These differ from residential or BTL mortgages in several key ways:

• LTV Ratios: Loan-to-Value (LTV) ratios are generally lower than BTL mortgages, often requiring a deposit of 25% to 40% or more.
• Interest Rates: Rates are usually higher and negotiation is often required, depending on the operational track record of the business being financed.
• Underwriting: Lenders assess the viability of the business (the care home operation) alongside the value of the property asset. The strength of tenancy contracts (e.g., contracts with the local authority or housing association) is a major factor.

Navigating UK Planning and Licensing

Before committing to finance, you must confirm that the property has the correct planning permission for its intended use. Attempting to use a C3 (Dwellinghouse) or C4 (Standard HMO) property for institutional care without the requisite C2 planning consent can lead to enforcement action by the local authority, jeopardising your ability to operate the business and, consequently, repay your mortgage.

Supported living properties sometimes operate under a complex structure, often managed by a housing association or specialist provider. Your lender will require absolute clarity on the legal setup and the regulatory compliance required for your specific model (e.g., whether CQC registration is needed).

People also asked

Can I use a commercial mortgage for a standard HMO property?

While specialist commercial lenders can offer finance for large HMOs, it is usually less cost-effective than a standard specialist buy-to-let mortgage designed specifically for HMOs, which typically offer lower interest rates and higher leverage.

What is the typical deposit needed for a supported living property mortgage?

For specialist commercial mortgages relating to supported living or care properties, lenders typically require a larger deposit compared to residential investments. You should generally expect to put down between 25% and 40% of the property value, depending on the lender and your operational track record.

Are lease options for supported living easier to finance than purchasing?

Leasing arrangements, where the investor acquires the property and then leases it to a care provider or housing association, may simplify the finance application by providing a secure, predictable commercial income stream. Lenders often look favourably upon long-term, inflation-linked leases to reputable tenants.

Do I need CQC registration to get finance for supported living?

It depends entirely on the level of care provided. If the facility provides regulated activities, such as personal or medical care, CQC registration will be mandatory, and lenders will check that the necessary licences are in place before approving finance. If the property only offers accommodation and basic housing management, CQC registration may not be required, but strict local authority regulations will still apply.

What happens if my supported living tenants stop paying rent?

In properties leased to specialist providers (e.g., housing associations), the provider is typically responsible for rent payments, transferring the risk of void periods away from the landlord. However, if you manage the property directly, voids and non-payment pose a significant operational risk that must be factored into your repayment capability for the commercial mortgage.

Conclusion

If you are looking to finance a care home or supported living property, you must discard the idea of standard HMO mortgages. This type of investment falls firmly into the specialist commercial sector due to the required planning use class and the institutional nature of the income stream. Success in securing finance depends heavily on presenting a robust business plan, demonstrating regulatory compliance, and working with a specialist broker who understands the nuances of the C2 Use Class and complex commercial lending structures.

Whether you need short-term bridging finance to manage the acquisition and conversion, or a long-term commercial mortgage, specialist financial advice is essential to navigate the higher risk and complexity associated with these rewarding but regulated property sectors.