Multi-Unit Freehold Block Mortgage Guide

Find out everything you need to know about Multi-Unit Freehold Block (MUFB) mortgages with our comprehensive guide.

We’re experts in small & large Multi-Unit Blocks. Please call us to discuss an enquiry you have.

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Multi-Unit Mortgage Guide

Author: Darren Ferguson – Mortgage Specialist & Owner

Published: 4th May 2023

Updated: 20th October 2023

Read Time

Read Time – Approximately 8 Minutes

Our Multi-Unit Block mortgage guide should be helpful, but it’s always best to speak with an adviser to discuss your own personal circumstances and to get the best advice. Call us on 01604 212879 should you have any questions.

What is a Multi-Unit Freehold Block?

A multi-unit freehold block is a property that comprises multiple self-contained units, such as flats, that all fall under the freehold title of the building. This could be as few as two flats, up to hundreds for a large multi-unit block. Instead of each of the units having their own individual leasehold titles, they will all be owned under one single freehold title, hence, multi-unit freehold block, referred to by mortgage lenders as a MUFB for short.

In some instances, the MUFB may not be a block of flats but could be a row of houses all under one title, which lenders will class as a Multi-Unit Block.

This means the owner, an individual, or a company completely controls the building or buildings.

What is a Multi-Unit Block Mortgage?

It is a specific type of mortgage used to secure funding against a property that is comprised of many self-contained flats, apartments or houses.

Mortgage lenders will have specific products for these types of properties, with varying products dependent upon whether the block is classed as a small or large multi-unit freehold block.

The mortgage is based on the rental income generated by each unit, each of which will be let under a separate assured shorthold tenancy agreement, or AST for short.

It’s important to note that you cannot use a standard buy-to-let mortgage for a multi-unit block property.

What is the difference between an HMO and a Multi-Unit Block?

Both types of properties house multiple tenants, but the two have several key differences.

Firstly, an HMO is typically one building, a single house or flat, with each tenant having their own bedroom but sharing common facilities, such as a kitchen or bathroom. Each tenant may have their own AST or be named on a multi-tenant agreement, for example, as part of a student house share.

With a Multi-Unit Block, the building will contain multiple units, each of which will be self-contained, have its own entrance and with its own kitchen, bathroom and living accommodation. Each tenant in each self-contained unit will have their own individual AST agreement. There may be some sharing of hallways and garden spaces, but each unit will be self-contained in its own right.

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Two tenants waving at each other in their apartment block

Types of Multi-Unit Block

Mortgage Lenders will offer different products depending on whether the block is classed as a small multi-unit block, typically no more than six self-contained units, or a large multi-unit block of 7 self-contained units or more.

Small-Multi-Unit-Block

Small Multi-Unit Block

Small Multi-Unit Blocks tend to be 2 to 6 self-contained units, typically converted houses. Most specialist lenders will offer multi-unit mortgages for properties ranging from 2 to 6 units. 

Large-Multi-Unit-Block

Large Multi-Unit Block

Large Multi-Unit Blocks tend to be purpose-built blocks, for example, large student blocks or purpose-built blocks of flats. Some buy to let lenders can consider multi-unit blocks up to 20 units, but anymore than that and the property will need to be financed through a commercial lender.

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Why do business with us?

It’s challenging to source multi-unit block mortgages online. Not all lenders offer MUFB mortgages, and those that do will have specific criteria. We’re experts in MUFB mortgages and will find the best mortgage for your needs. Call us on 01604 212879.

What are the advantages of a Multi-Unit Freehold Block?

Multi-Unit Freehold Blocks can be an excellent form of investment with healthy returns if managed effectively.

In what feels like ever-tightening margins for buy-to-let landlords, they seek properties that can obtain higher yields. MUFBs offer great potential to achieve higher yields than a standard buy-to-let property, albeit with increased management requirements.

They can also offset the risks of rental voids. With a single buy-to-let, if you have a void period, all your income is gone, whereas with a multi-unit block losing one tenant will reduce your income, but it won’t have the same impact as losing all of it.

Should you decide to sell the property at some stage or part of it, you can also consider separating individual titles to maximise any sale revenue.

 

What are the disadvantages of a Multi-Unit Freehold Block?

The main disadvantage is the increased level of management required for managing a Multi-Unit Block. You have multiple units to maintain and service, with multiple tenants who may have multiple issues, the cost of which, both from a time and financial perspective, could be high.

It’s important to consider both the advantages and disadvantages of a Multi-Unit Block but managed effectively, they can be a sound financial investment.

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Do all mortgage lenders provide Multi-Unit Freehold Block Mortgages?

No, this is a specialist area of lending. There are a minimal number of ‘standard’ buy-to-let lenders that can consider small MUFBs, however, it is primarily specialist lenders that will provide Multi-Unit Freehold Block mortgages, typically to a maximum of 20 units. If the property has more than 20 units, it will likely need to be funded by a commercial mortgage lender.

Which lenders offer multi-unit block mortgages?

At Adept Mortgages, we have access to the full range of lenders that offer multi-unit freehold block mortgages.

  • Aldermore Mortgages
  • Bath Building Society
  • CHL Mortgages
  • Fleet Mortgages
  • Foundation Home Loans
  • Hampshire Trust Bank
  • Kensington Mortgages
  • Kent Reliance
  • Keystone
  • Interbay Commercial
  • Landbay
  • LendCo
  • Lend Invest
  • Molo Finance
  • MT Finance
  • Paragon Bank
  • Precise Mortgages
  • Quantum Mortgages
  • Shawbrook Bank
  • The Mortgage Lender
  • United Trust Bank
  • Vida Home Loans
  • West One Loans
  • Zephyr Homeloans

It’s important to note that each of these lenders will have their own individual criteria to satisfy and criteria is not one size fits all. It’s always best to get advice to save time and money. Call us on 01604 212879 or request a quote below.

Funding for Multi-Unit blocks is also available through a limited company.

Call us on 01604 212879 for a no obligation multi-unit block mortgage review

How is a Multi-Unit Freehold Block valued?

This will depend on the size of the block and which lender is used. There are two potential valuation methods, ‘block value‘ and ‘aggregate value‘, which we explain further below.

Multi-Unit Freehold Block - Block Valuation Method

Block Valuation

This is effectively where the valuer values the property as one single block.

Typically the valuer will aggregate the individual value of all the flats combined and then deduct a percentage from that aggregate value depending on the demand for the sale of the block as a whole. This could be in the region of a 10-15% deduction on the aggregate value. Typically more standard lenders will offer block valuation methods.

Multi-Unit Freehold Block - Aggregate Valuation Method

Aggregate Valuation

The value of the individual flats within the block.

The property is valued considering each unit’s individual valuations within the block. This is typically 10-15% higher than a block valuation method. This can help with borrowing a larger loan amount if needed. The rates may be slightly higher, but raising the extra funds required may be worth it.

What is the maximum loan to value (LTV) with a Multi-Unit Freehold Block?

This depends on how many units are within the block and can change regularly as and when lenders update their products. Typically you can obtain a higher LTV for smaller multi-unit blocks, and currently, the best LTVs are as follows.

Small-Multi-Unit-Block

Small Multi Unit Block - Maximum LTV

85% LTV

(up to 100% LTV with some lenders can be considered with additional security)

Large-Multi-Unit-Block

Large Multi-Unit Block - Maximum LTV

75% LTV

(up to 100% LTV with some lenders can be considered with additional security)

What are the interest rates for Multi-Unit Block mortgages?

Interest rates will vary depending on the nature and size of the block. Many factors can influence the rate payable, such as:

  • Loan Size
  • Number of units within the block
  • Loan To Value
  • Experience
  • Whether the property is held in a personal name or a Limited Company.
  • Credit Profile
  • Tenant profile

Rates will generally be higher than those of standard buy-to-let mortgages. It’s best to call us, and we can discuss your situation and provide a better steer on rates for you.

Interest Rates & Fees

Due to the Bank of England base rate, currently sitting at 5.25% (as of 20/10/2023), affordability can be an issue due to the harsher stress tests lenders have had to apply to their products.  To help landlords achieve the loan amounts required, and to help reduce mortgage payments lenders have a range of lower-rate products with higher arrangement fees.

 

Multi-Unit Blocks with Individual Leasehold Titles (all owned)

In some situations, the owner of the freehold of the block has created leasehold titles for each individual within the block.

This can potentially cause issues with mortgage lenders depending upon how this has been structured.

The Commonhold and Leasehold Reform Act of 2002 states that the Freeholder and Leaseholder must be separate legal entities. This means that if the Freeholder of the building, let’s say an individual, is also the leaseholder of the units, they are the same entity, and lenders will therefore have an issue with this.

Should the Freeholder be a limited company, of which the individual is a director, and the leaseholds held in their personal name, this can be okay, but many lenders are still wary when an individual has an interest in both the freehold and leasehold title.

Taking a charge over both the freehold and leasehold is an option some lenders will look to exercise to satisfy this situation.

 

Multi-Unit Freehold Blocks with Individual Leasehold Titles (partially owned)

Another scenario is where the owner of the Freehold Block has created individual leasehold titles for each unit, or some of the units, and then sold them on, for example, 20 units within the block, but five have been sold off to other owners, so the landlord retains 15 of the 20.

This can again cause some issues with lenders as some lenders will only lend against Multi-Unit Freehold Blocks where the block is ‘unbroken’, (none of the units sold off). It will depend on the number of units, so it’s best to call us to discuss this in more detail.

 

Multiple Units Where The Freehold Is Not Owned

There are also situations where a landlord wishes to purchase or refinance individual flats within a block, which may be all or some of those units but will not own the freehold, just the leasehold to each unit.

This scenario would not be classed as a multi-unit block but rather just the purchase or refinance of several individual units.

This can cause issues depending on the number of units in the block and how many are being financed. Most lenders will have an ‘exposure’ or ‘concentration’ limit on how many properties they are happy to fund in one block, which typically sits around 25%, so if you have a block of 20 flats, a lender may only finance 5 of those flats, meaning multiple lenders could be required if more units need financing.

This scenario could also apply to large developments of new build flats. We have had numerous occasions where a lender has advised they have reached their limit regarding how exposed they are to a new development.

 

What are the criteria for a Multi-Unit Freehold Block mortgage?

All lenders will have different criteria you’ll need to meet to qualify for a Multi-Unit Freehold Block mortgage. We have years of experience dealing with MUFB lenders, so please feel free to call us to discuss your situation further.

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Who Can Apply?

The following types of applicants can apply for an HMO mortgage in the UK:

 

  • Individuals
  • Limited Companies (SPV and non-SPV)
  • Partnerships
  • Foreign Nationals
  • EX-Pats
  • Offshore Companies
Income and employment

Income & Employment

Practically all lenders will require you to be in some form of employment, whether that’s employed or self-employed. If you are self-employed, you’ll typically need to have been self-employed for at least 12 months and to be able to provide at least one year’s tax calculation evidencing income.

Concerning income, several lenders do not have any minimum income requirement, just that you can evidence an income. Other lenders with a minimum income will generally require a minimum income of around £15,000 per annum.

credit-profile

Credit Profile

Standard lenders will typically require a clear credit profile.

Several lenders can work with varying degrees of poor credit issues. Should you have concerns about how your credit could impact any potential borrowing, we’d advise you to get an up-to-date credit report and send it to us for review. We’ll then be able to advise of your options.

We generally recommend check my file as it shows data from all 3 of the leading credit agencies. You can obtain a free report below.

Get the only Credit Report that checks data from Equifax, Experian, TransUnion and Crediva

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(‘Free’ report relates to an initial 30 day free-trial, then £14.99 a month – you cancel anytime online)

Important Information

Landlord Experience & Multi-Unit Freehold Blocks

Landlord experience is a critical factor with the vast majority of Multi-Unit Block mortgage lenders, with most requiring experience of at least 12 months of ownership and management of a buy-to-let property. There are three applicant scenarios we see, as follows:

First Time Buyer

An individual who does not currently own or has ever owned a property.

Most MUFB lenders will not lend to a first-time buyer.

There are options with 2 or 3 specialist lenders, but the rates will be much higher than typical standard Multi-Unit rates.

First Time Landlord

An individual who is currently a homeowner. This doesn’t necessarily need to be for any period of time, just that the applicant is a homeowner.

As a first-time landlord with no landlord experience looking to buy your first Multi-Unit Block, your options will still be limited as most lenders require a minimum of 12 months of landlord experience, but there are a couple of standard MUFB lenders who are happy to lend to first-time landlords.

These lenders will typically lend to a first-time landlord on a small MUFB only.

Experienced Landlord

An individual who has owned a buy-to-let property, or MUFB for a minimum of 12 months.

MUFB funding options will be available across the market.

How To Apply

Its simple to apply, just call us on:

01604 212879 and we’ll handle everything for you.

Lets-talk-about-you

Let’s talk you

It’s not just about the property. You’ll need to meet specific criteria, so it’s important we understand a little about your background to make sure we find the best option for you. Time spent at the front end is time saved at the back end!
lets-talk-about-property

Let’s talk property

We’ll need to know all about the property, such as value, type, location, income and ultimately, your plans. The more we know, the better, and we’ll guide you through what we need to know.
Lets-talk-about-options

Let’s talk options

Time to piece it all together and talk about your options. We’re firmLets get movin believers in straight talking, so we’ll tell you what can and can’t be done and present you with options best suited to your requirements.

Lets-get-moving

Let’s get moving

If you’re happy with the options discussed, it’s time to get things moving and get an agreement in principle. We’ll handle everything and support you along the way to help ensure your application is as smooth as possible.

How much can I borrow for a Multi-Unit Block?

With standard lenders, loan sizes will typically range from £100,000 to £4 million.

Commercial mortgage lenders can offer larger loan sizes of up to £25m.

This will be subject to experience and background.

How is affordability calculated for a MUFB?

Affordability is calculated much like a standard buy-to-let property.

You can learn more about how affordability is calculated by visiting our guide to rental stress tests, and you can calculate your monthly payments with our range of buy-to-let mortgage calculators.

Specific calculations will vary from lender to lender, but in general, most lenders will require the rent to cover 125% to 145% of the mortgage payment, calculated at an assumed rate, which in the current market could be anywhere from 5% to 7%.

Some lenders might have a higher interest cover ratio of up to 175% for multi-unit blocks.

It will also depend on whether you buy as an Individual or a Limited Company.

Find out more about bad credit buy to let mortgages

Read more about interest-only buy-to-let mortgages

Visit our first-time MUFB and HMO guide to learn more about experience requirements

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Frequently Asked Questions

Can I get a multi-unit block mortgage as an individual or do I need to set up a Ltd Company?

MUFB mortgages are available to both individuals and Limited Companies. However, rates with most lenders are the same whether buying as an Individual or a Limited Company, so getting tax advice from a qualified accountant is worthwhile to see if a Limited Company is an option to consider. 

Thanks for reading our Multi-Unit Freehold Block Mortgage Guide!

A small selection of some of our MUFB lenders

We source our mortgages from the whole market, from the leading High St Banks & Building Societies to specialist MUFB mortgage lenders. A selection of our MUFB lenders is shown below.