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Mortgages for Multi-Unit Freehold Block / Unbroken Block of Flats

Multi-Unit Freehold Block (MUFB) mortgages explained:
Why do you need an Adviser that understands Multi-Unit Freehold Blocks of Flats, Broken-up Blocks of Flats and unusual circumstances? 

Are you losing out by not having Multi-Unit Freehold Blocks of Flats as part of your investment property portfolio strategy? Why not let us assist you with the financing of these.

Often abbreviated as MUFB’s, this type of asset class is proving to be very popular for many landlords. But what is it that attracts investors to multi-unit blocks of flats?

Less management time – They are easier to manage than multiple individual flats and houses as they are all within the same block. This will help improve your time management across your portfolio as you are not having to drive to multiple properties.

Block Discount – MUFB’s consisting of multiple units are often cheaper to purchase, than if you were to buy the equivalent number of flats but as separate units – this is referred to as the block discount.

Higher Yield – The potential yield produced from a MUFB will also attract investors to these properties as they tend to produce higher yields. This is because of the block discount and the rental income being the same as equivalent long leasehold flats.

What is a MUFB property? This is one freehold residential property split into many flats that don’t have their own individual title.

Key Features: MUFB Mortgage
  • Typical interest rates and fees – Call our advisers
  • MUFB Mortgages from £100,000 to £50 million; subject to affordability and credit criteria
  • Loan to values up to 75% (100% with cross charges)
  • Loan to values below 50% could be eligible for standard BTL mortgages, thereby benefitting from lower interest rates
  • Mortgage Term: 1 to 30 years
  • Payments: interest only / capital repayment / part capital / interest compounded / rolled or retained (no montly payments)
  • Purchase / Refinancing / Capital Raising (any purpose)
  • No minimum outside income / All income types
  • No max of number of rooms / units (X to XX)
  • No max of number of tenancies
  • All credit histories: High Net Worth to Credit Repair
  • All applicant types: Individuals / Corporate (Ltd Co’s) / SSAS etc
  • All tenures: Freehold / Leasehold (no minimum term)
  • All residential tenants: Working, Students, LHA benefits
  • All residential tenancies: AST to Corporate Leases
  • All business tenants: No restrictions on industry/sector
  • All business tenancies: Fully repairing leases / Licences
  • EPC-enhanced products available

What is an Unbroken and Partially Broken Block of Flats?

An unbroken block of flats is another name used mainly by Estate Agents when marketing these properties for sale. The term aims to explain to would-be buyers that none of the flats have been separated or broken up onto separate long leaseholds.
Despite a different name a property that is an “Unbroken Block of Flats” is the same a Multi-Unit Freehold Block from a lender’s and valuer’s perspective.
 
You do come across some properties that are “Partially Broken Block of Flats” which usually means 1 or more of the flats in the block has had a leasehold title created for it.
For example, a block of 10 flats has 2 flats that have leaseholds created; as such the remaining 8 flats are still part of the freehold title. The property is still classed as a MUFB but because 2 are subject to leaseholds, they cannot be included in the value of the freehold property; some lenders will not lend on these properties because they want unbroken blocks of flats as security.
 
There are still lenders that can lend on partially broken blocks of flats but this is where you need an expert in this field such as Advocate Finance to approach the right lenders.
 

Multi-Unit Freehold Block (MUFB) Mortgages

However, financing MUFB’s is not as straightforward as it may be for simple singular houses and flats. There are fewer lenders available and many mortgage advisers do not have the required level of expertise. Fortunately, our Advisers are experts in this area of Buy-to-Let lending. We also have access to a large range of lenders and products, that will best suit the scenario you are faced with when it comes to Multi-Unit Freehold Blocks of flats.

Finding a solution for your standard blocks of flats is not too problematic in the current market. However, when there are quirks and unusual circumstances related to these properties, this is when it can become challenging. Fortunately, the knowledge we have in this area allows us to find you a solution when no one else can.

What do we mean by quirks and unusual circumstances being related to your MUFB?
  • Firstly, we do have access to lenders who can accept blocks of flats, where some of the individual units within the block may be below 30 sq meters. For many lenders, this can be a problem. 
  • We also have lenders available that can lend on a block of flats when the utilities for the separate units originate from the same mains (gas, electricity, etc.).  
  • Another problem area that we can help with is finding a lender to accept a MUFB that may have some of the flats sold off/kept on separate leasehold titles. This is sometimes referred to as a broken-up block of flats, as the block consists of both a freehold block and separate leasehold flats. 

Do Multi-Unit Freehold Blocks need HMO Licensing?

You will have read in the section above that there are general rules on when a multi-let, HMO property requires a licence. But the local council can change this and implement their own requirements. Lenders therefore cannot keep track of which councils have moved away from the general definition of when a licence is required. The lender will therefore require confirmation in writing or email, from the council when the property does not require an HMO licence.

For HMO properties that do not require a licence, the next important factor in selecting a lender is:
  • Will the lender value the property based on the market rent as a multi-let, HMO or single-family rent? This is extremely important to you and your broker because lenders assess this differently and the amount you can borrow is dependent on the market rent.
  • The number of tenants – Some lenders limit the number to 4; however, there are lenders that have no limit.
  • Does each tenant have their own tenancy agreement or have they signed one tenancy agreement?
  • Do the rooms have locks on the doors? This will be reported to the lender by the valuer when they visit.
 

FAQs

80% loan to value is the current maximum where the only security provided to the lender is the MUFB.

However, we have lenders that can consider lending with an additional security charge on another property with sufficient equity, meaning that we have successfully arranged mortgages of 100% loan to value for MUFBs.

Absolutely – Whether the property is converted or a purpose built block of flats, makes no real difference to a lender that will provide a multi-unit freehold block mortgage.

We have arranged mortgages and loans for large numbers of freehold houses that have, over the years, been converted to 2 or more flats. 

The main difference is the shared facilities and services.

  • HMO’s can share facilities such as bathrooms & kitchens between the tenants.
  • Multi-Unit Freehold Blocks are all independent of one another and there are no shared facilities.


The other big difference is utilities such as electricity, gas and water.

  • Multi-Unit Freehold Blocks all have separate service supplies to each unit.
  • HMOs normally have only one supply of services, which the rooms share and as such the rent amounts are normally inclusive of these costs.

This is a mis-conception that Banks don’t lend on multi-unit blocks of flats.

High Street Banks have  commercial departments who can lend on these properties, same as specialised banks and other specialised lenders who have the internal expertise, knowledge and experience to provide quick credit decisions.

Yes – You can and we have arranged mortgages for clients who have been in this position and resided in the block.

However not all lenders allow this so it is important to select the correct MUFB lenders to approach and clearly present the circumstances to the lenders. 

 

You can obtain a buy-to-let mortgage for a multi-unit freehold block.
There is sometimes some confusion as to whether you need a buy-to-let or a commercial mortgage for a multi-unit freehold block. 

Our advisers offer a free consultation, so please give us a call or use the “Get in Touch With Us” form at the end of this page

Advantages of MUFB’s

  • Can tend to be higher-yielding properties than standard residential houses and Flats
  • Don’t have the operating expenses associated with HMOs
  • Effective when it comes to time management as you can have multiply rental property all at the same address.
  • Run-down multi-unit blocks can form part of your BRRR strategy, which can also involve title splitting at the end of the refurbishment to create individual leasehold flats.

Disadvantages of MUFB’s

  • There is a large panel of lenders that will provide mortgages, but this is still far less than for standard houses and flats.
  • Some larger blocks of flats can involve large capital sums, and the deposit requirements can be large for investors that do not have access to larger deposits.
  • Some lenders will require existing landlord experience
  • Can we be slower to sell their size than individual leasehold flats.

How can YOU benefit from our advice?

  • If speed is essential to the transaction, our advisers will prioritise your case to ensure deadlines are met.
  • Our Advisers have expert knowledge when it comes to Multi-Unit Freehold Block Mortgages.
  • We offer a FREE assessment and have a no upfront fee policy. Our typical fee for 99% of our clients is capped at £395
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