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Author: Elliott Culley - Director & Mortgage Adviser of Switch Mortgage Finance
What is an MUFB mortgage?
A Multi-Unit Freehold Block (MUFB mortgage) is simply a property split into flats, but instead of having individual leaseholds, it’s held under a single freehold title. You will need a specialist type of buy to let mortgage for this type of property.
Not all mortgage lenders offer products for multi unit freehold block mortgages, and some will have a limit on how many self contained units they can accept.
Specialist mortgage lenders dominant this space and expect lenders fees to be higher than on a convential buy to let mortgage.
What is a MUFB property?
A MUFB property is a single freehold property, which has been split up into multiple self-contained units. Each unit will have separate entrances, kitchen, and bathroom areas, and they can have shared areas such as hallways and outdoor spaces.
Each flat is self-contained either as a studio flat with shared facilities or with its own kitchen and bathroom facilities. Each property listed on the title is self-contained and can be rented out separately by different tenants.
Do I Need a Specialist Mortgage for Multi-Unit Freehold Blocks?
Yes, you will need a mortgage from a specialist lender. Not all lenders will offer MUFB mortgages, and you certainly won’t find a high street lender offering a mortgage on this type of property.
There are some lenders that have restrictions on how many units you can have in the block. Most lenders in this space will do a maximum of 6 units on one title, but there are other lenders that will go higher.
Although not mainstream there are lenders in this market space, which helps drive competition for better rates.
MUFB Mortgage Lenders
A list of MUFB lenders would include:-
There are many other lenders that specialise in this field and all of the ones above offer different products and have different criteria. Most will want you to use a mortgage broker instead of going direct.
Speak to an Expert!
Contact us today for expert advice and guidance on your unique mortgage and property needs. We will work with you on a one-on-one to basis to help you find the right solution for your needs.
With our experience you can rest assured that you are in good hands when it comes to securing the financing you need for your property.
Are MUFB Mortgages a Good Investment?
MUFB properties are likely to have a higher income and yield than if you were to rent your property on a standard let. Maintenance costs for running this type of property can be high, but the potential profit far outweighs this.
How Much Can I Borrow on an MUFB Mortgage?
How much you can borrow on an MUFB mortgage is based on the rental income you are receiving, the interest rate and your current tax position. The mortgage lender will stress test the rental income to ensure it can cover the monthly mortgage payments.
If you are a lower rate taxpayer, or are purchasing your HMO property through a limited company you will have a lower stress test calculation to pass. You may also be able to lend more on a 5 year fixed rate compared to a two year fixed or tracker product.
In most cases, as the rental income yield with MUFB’s is strong, affordability is unlikely to be an issue even at higher LTVs.
Are MUFB mortgage rates more expensive?
Lenders that are prepared to lend on an MUFB will charge slightly higher fees and rates for a mortgage. However rental income is usually much higher than a standard buy to let, therefore the higher rate you are charged is usually offset, when it comes to overall profit.
How Much Deposit Will I Need?
The majority of buy to let mortgage lenders require borrowers to have at least a 25% deposit. You may find a mortgage lender willing to accept 20% deposit, but this is rarer.
Can I Live in One of the Flats Within a Multi-Unit Freehold Block?
Although rare, there are lenders that can consider this. However your personal circumstances will need to be assessed by the lender to ensure they are happy to lend in with you living in one.
Not all lenders allow this so it is important to select the correct MUFB lenders to approach and clearly present the circumstances to the lender.
Limited Company MUFB
If you’re a property investor who has set up a limited company for your investments, you can purchase an MUFB Mortgage in a limited company.
In many cases, limited company portfolio mortgages offer tax advantages and make managing your properties easier. However, interest rates for limited company buy to let can be more expensive than in your personal name.
Can I Purchase a MUFB Property as a First Time Landlord?
Yes there are lenders that offer MUFB Mortgages for first time landlords. You will need to ensure you have a minimum income of around £25,000 per annum. Most lenders do not allow first time landlords, so make sure you speak with a broker who can guide you to the correct lenders.
Why Choose a Mortgage Broker?
When purchasing an MUFB mortgage, you’ll want access to the best products on the market. For this reason, we’d highly recommend having an advisor on board. Our specialists can find you a suitable lender and help you secure a mortgage in no time at all.
Why Switch Mortgage Finance
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