HMO Refinance to Repay Development Finance and Release Equity

Many property developers choose to retain completed HMOs as long-term investments. However, securing the right refinance can be challenging, particularly when lenders use conservative valuation methods.

In this case study, Positive Commercial Finance arranged an HMO Refinance that repaid the client’s development finance while releasing equity to fund their next project.

The Opportunity

Our experienced developer client had converted a large residential property into a high-quality seven-bedroom HMO using one of our development finance facilities.

Once the refurbishment was complete, they decided to keep the property within their investment portfolio rather than sell it.

The Challenge

The client wanted to refinance onto a long-term HMO mortgage while maximising the amount they could borrow.

However, they had experienced difficulties in the past because some lenders valued HMOs using a standard residential approach rather than an investment valuation. This often resulted in lower valuations and reduced borrowing.

To achieve the desired outcome, we needed a lender that fully understood the commercial value of HMO investments.

Our Solution

Positive Commercial Finance approached several specialist lenders and discussed the property’s investment potential in detail.

We carefully shortlisted lenders that were prepared to assess the HMO using an investment valuation, helping maximise the property’s lending value.

After reviewing the available options, the client selected a competitive five-year fixed-rate HMO mortgage that met both their borrowing and investment objectives.

Deal Structure

• Loan to Value (LTV): 75%
• Interest Rate: 3.99% fixed for five years
• Arrangement Fee: 1.5%
• Repayment Type: Interest Only
• Term: 10 years

The Result

The refinance successfully repaid the original development finance while releasing additional equity from the completed property.

As a result, the client retained a strong-performing HMO within their portfolio and secured the capital needed to begin their next development project.

This case demonstrates how choosing the right lender and valuation methodology can make a significant difference when arranging an HMO Refinance.