Multi-Unit Freehold Mortgages (MUFB)

Deciding on whether a multi-unit freehold block mortgage can be extremely confusing. There are many circumstances where a MUFB can be an extremely beneficial investment opportunity and provide some much-needed protection from rental voids. MUFB’s may also offer a more lucrative yield if you compare it to a single residencyThe borrower's residency status, such as whether they are a ... buy-to-let property.

This article will take a deeper dive into a multi-unit freehold block mortgage, what circumstances are required to get one, and some of the best brokers available to you.

Frequently Asked Questions About Multi-Unit Freehold Mortgages

What is a multi-unit freehold?

A multi-unit freehold block, also known as a MUFB, is separate, independent, or multiple residential units held within one title. Therefore, no single unit is subject to a lease. Common examples include houses that have gotten converted into a block of flats or purpose-built flats.

Can you get a mortgage on a freehold property?

You can only get a mortgage on a freehold property with certain lenders. Not every lender will off you a mortgage on a freehold flat. If you do find a lender who is, expect to pass their criteria assessments, as you would for any other type of property.

How do I apply for a multi-unit freehold mortgage?

If you feel a MUFB would suit your particular requirements, we have listed several leading lenders for you to check out below.

Multi-Unit Freehold Mortgages

A multi-unit freehold block, also known as a MUFB, can be described as separate, independent, or multiple residential units held within one title. What this means is there is no one single unit that requires a lease. Common examples include:

– Houses that have since been converted into flats

– A purpose-built block of flats

– Several houses that are all help within one freehold title

For any property that falls under these categories they will show some of the following characteristics:

– Private spaces that are separate for each household or resident, where other households or residents do not have a right of access

– Some properties may have common areas that every resident or household can use, for example, a hallway or communal garden.

– Various entrances, with one designated for each household or resident.

The yield gained from a multi-unit property often tends to be much more fruitful than the yield from a vanilla buy-to-let property. Here is an excellent visual representation from Mortgage for Business:

Average Gross Yield:

Multi-unit rates and terms

As a rule of thumb, buy-to-let mortgage rates for multi-units tend to be higher than standard buy-to-let options for individual units. However, that doesn’t mean the rates are too highly-priced to make money from your rental income.

The right mortgage lender will offer you competitive rates if you find yourself in one of the following scenarios:

Borrowers

• First-time landlords
• Individuals, SPVs & trading limited companies
• No minimum incomeThe minimum income required for a borrower to be eligible fo...
• Ex-pats and foreign nationals
• No upper age limits

Properties

• Multi-units with anywhere from 2 to 100 separate units
• Multi-units located above commercial premises
• Several houses under one freehold title

What are the Benefits of a MUFB?

There are many reasons why you may consider taking out a MUFB. For starters, the demand for affordable rental properties has never been higher. Therefore, that would suggest there has never been a better time to get a MUFB for any portfolio landlords.

Various types of tenants are interested in MUFB properties, including young professionals, couples, families, or students, depending on what their circumstances may be.

MUFB mortgages are available in two forms, either as interest and capital repayment or on an interest-only basis, and can be provided by a specialist lender.

Where can I get a MUFB from?

When it comes to getting a MUFB for your flats, combined terraced houses, or rental properties, there are several different mortgage options on offer from lenders. Some will offer better rates on a certain property type, while others will offer other benefits on multi-unit freehold block mortgages.

We can recommend a suitable lender for you once we know full information about your circumstances. Below is a brief outline of what lenders will lender and some of their criteria. The criteria is subject to change so please check with us as to what is suitable for you.

Aldermore

MUFB mortgages -YES

CHL Cheshire Home Loans

Subject to max of 6 units and minimal property value of £150,000. Refer to lender for full T&C’s.

Fleet Mortgages 

Yes – 3 or more self contained units under 1 Freehold title. (Properties split into just 2 units can be considered under standard lending criteria and products, subject to the number of occupants in the security.) Maximum 10 units under 1 title

Foundation Home Loans

A single building with multiple, separate, independent residential units owned under a
single freehold title, meaning no unit is subject to a lease. This particular property type comes
in a variety of configurations such as purpose built blocks or flats or houses converted into flats.

Interbay

Accepting MUFB applications on properties of up to 20 bedrooms/units.

Key criteria:
• LTV up to 70%
• Max loan size £1.5m (higher amounts considered by referral)
• Available as purchase or remortgageRefinancing an existing mortgage with a new mortgage.

Kensington

Yes – maximum of 6 units

Landbay

Will the lender accept an application to purchase a property which is in a Multi-Unit Freehold Block?
If so, what is the policy on this?

75% Small – Upto 6units
70% Large – 7 -12 units
Max Number of 12 Units
Each Unit must be larger than 25sqm
Utilities must be split
Landlord must have 12months rental experience
We offer Investment valuations

Lend Invest

Yes. £3,000,000 maximum loan amount.

Monmouthshire

Yes up to 4 units, must have 2 years experience as a professional landlord with a minimum income of £25k

Shawbrook Bank

Flats located within blocks are acceptable subject to usual criteria. If the block is over 5 storeys, it must have a lift.

Where there are up to 10 flats within the block, individual values of the flats can be used on an aggregated basis subject to individual leaseholds sales demand being within 12 months. Where there are more than 10 flats within the block, the investment block value must be used.

Individual flats with cladded blocks or entire cladded blocks of flats are unacceptable.

Vida

MUFB are accepted where up to 5 units with a minimum valuation of £125,000 (£175,000 in L&SE). At least one applicant must have 1 years landlord experience.

Precise Mortgages

Precise Mortgages will accept applications to purchase a property which is in a multi-unit freehold block, up to a maximum of six units within a single freehold block

HMOs vs. MUFBs

One common theme is for people to mix up HMOs and MUFBs, but they do have significant differences. Houses in Multiple Occupation (HMOs) tend to be student house-share agreements, whereby at least three of the tenants share the bathroom and kitchen facilities while not being part of the same household or family group.

HMO tenants also tend to have an assured shorthold tenancy agreement (AST) each, and individual tenants can move freely without impacting the tenancy of other residents who live there.

Multi-Unit Freehold Mortgages: Summary and Key Takeaways

Now you have all of the information you need to decide whether a MUFB is the correct option for your needs. Make sure you enquire with many brokers before making a decision to be sure that you have chosen the right multi-unit freehold block mortgage for you.

Consider how much money you would like to borrow, whether you want an interest-only option, and what kind of interest rate you are willing to pay.

The easiest way to be sure you are working with a good brokerage is to check the reviews from some of its other clients.

If you are interested in limited company buy to let mortgages, you can further read it on our blog.