Multi unit freehold block mortgages

A multi unit freehold block mortgage is a buy-to-let mortgage designed specifically for freehold properties comprised of multiple self-contained units. By having one mortgage loan secured across the entire block, landlords can finance these types of multi unit investments efficiently.

A multi unit property refers to a single freehold asset that contains multiple residential units. There are several common configurations that fall into the multi unit category:

• A large house that has been segmented into separate self-contained flats, often through internal walls and doorways. This converts a single home into a multi unit dwelling.
• A structure purpose-built as a block of flats, with each flat independently accessed from shared internal hallways. This purpose-built design creates built-in multi unit accommodation.
• A grouping of adjoining houses consolidated under one underlying freehold title. While still separate houses, the single freehold title unifies them as a multi unit block.

The key element is having more than one residential unit incorporated into the property under a single freehold ownership. Multi unit dwellings allow each unit to be let and managed individually. MUFB mortgages cater to landlords experienced in managing more complex rental properties with multiple tenants.

While they both contain multiple rental units, multi unit freehold blocks differ from houses in multiple occupation primarily in that MUFBs consist of self-contained flats.

MUFBs: each flat or house has its own separate kitchen, bathroom facilities, entrance and tenancy agreement.

HMO: involves tenants sharing communal living spaces and amenities.

While a MUFB consolidates multiple units under a single freehold, the units themselves remain fully independent and private. This enables MUFB landlords to provide a higher level of separation and privacy for tenants while still efficiently managing a multi unit block. So the key distinction is that MUFBs deliver scale with multiple fully equipped flats, whereas HMOs offer communal housing with shared living spaces.

There are a few potential financing routes for obtaining a multi unit rental property:

Cash Purchase

Ideal for landlords with large cash reserves.

Individual Unit Mortgages

Separate lending per unit. Requires multiple valuations and individual leases.

MUFB Mortgage

Specialist product financing the block as a single asset. Efficient leverage.

A multi unit freehold block mortgage provides tailored financing treating the block as one investment. This streamlines borrowing and administration.

While specific criteria vary between lenders, typical requirements to qualify for a multi unit freehold block mortgage include:

• Minimum 2 residential units in the block
• Minimum 25% deposit or equity in the asset
• Maximum 75% LTV loan-to-value ratio
• Minimum applicant age of 21
• Average of 145% monthly mortgage payments (using a stressed rate)
• Prior experience as a landlord managing properties usually required
• Limited company SPVs accepted

Each self-contained flat or house will need its own council tax bill, address, and tenancy agreement. Some lenders may consider first-time landlords for small 2-5 unit MUFBs.

When applying for financing on a multi unit rental property, follow these tips for the best chance of mortgage approval:

• Highlight your experience managing other rental units
• Have accounts evidencing consistent income from your properties
• Keep your credit score in good shape
• Be ready to verify the source of deposit funds if not using equity
• Have all property documentation organised for easy review

Working with one of our brokers experienced in MUFB lending can steer you through the process.