Refinancing an HMO with Adverse Credit History

Positive Commercial Finance specialises in arranging HMO Mortgages for landlords with complex circumstances. This case study shows how we helped a client refinance an HMO property despite adverse credit, preventing an expiring bridging loan from becoming a much bigger financial problem.

The Background

Our client had purchased an HMO using a bridging loan and now needed to refinance onto a longer-term commercial mortgage.

However, time was running out.

The bridging loan was approaching its expiry date, and previous attempts to secure refinancing had been unsuccessful.

The client’s circumstances also made the application more complex.

Following a difficult divorce, they had accumulated personal debts and missed several payments, leaving a poor credit history.

More recently, they had become unemployed.

Although employment income had stopped, the HMO and several other investment properties continued to generate rental income that comfortably supported their ongoing financial commitments.

Looking Beyond the Credit Score

Many lenders focus heavily on historic credit issues.

Positive Commercial Finance instead identified lenders willing to assess the client’s overall financial position.

We presented the reasons behind the adverse credit, demonstrated that the missed payments were linked to exceptional personal circumstances and highlighted the strength of the rental income being generated by the property portfolio.

This gave the lender confidence that the client’s financial position had stabilised and that the mortgage repayments would remain affordable.

Deal Structure

• Loan to Value (LTV): 65%
• Interest Rate: 9.90% per annum
• Arrangement Fee: 2.5%
• Repayment Basis: Interest Only
• Term: 15 years

The Result

The new HMO Mortgage allowed the client to repay the existing bridging loan before it expired.

The refinance also released additional funds that were used to clear expensive credit card balances, significantly improving monthly cash flow.

Although the mortgage carried a higher interest rate than a mainstream product, it provided a practical short-term solution that placed the client in a much stronger financial position.

With the bridging loan repaid, unsecured debts reduced and finances stabilised, the client is now well positioned to refinance onto a more competitive mortgage product in the future.

This case study demonstrates how specialist lenders can often look beyond adverse credit where there is a clear explanation, strong rental income and a sustainable exit strategy.