MUFB Mortgages For Property Investors

Multi-unit freehold blocks, or MUFBs, give property investors a unique opportunity to create multiple income streams from a single freehold title. Securing finance against this type of property can be more of a challenge when compared to traditional buy-to-let residential mortgages, which is why you need a property finance expert on your side. 

Here at Rangewell, we help property investors raise the finance you need at rates that work for you. We’re specialists in all forms of property and have expertise in the more challenging areas of finance – including securing loans for MUFBs. Speak to our team today to better understand MUFB mortgage lenders and secure the loan you need. 

What is an MUFB?

An MUFB describes a freehold property containing multiple flats. Unlike other types of apartment blocks where each unit is held under their own leasehold, an MUFB sees a single freehold covering all individual  units.

An MUFB at-a-glance

• Single freehold property containing multiple self-contained units.
• Each unit has its own facilities, utility connections and private acess points.
• There are no individual leaseholds for each flat, but each tenant signs an individual assured shorthold tenancy agreement.

Typically units within an MUFB are split into a self-contained home, giving tenants access to all the necessary amenities within a unit such as bathrooms and kitchens. Unlike an HMO, where tenants share many of the communal aspects of the home, an MUFB splits each unit to have private entrances and self-contained facilities - all of which are offered under their own Assured Shorthold Tenancies (AST).

MUFBS tend to be more financially lucrative than single-tenant properties and HMOs, offering higher yields and more income security from one property. Having a higher number of tenants signed to ASTs means that even if some leave, your property will still generate income whilst you search for new occupants. 

The biggest drawback is the lack of lender support. Mainstream lenders view MUFBs as complex investments and typically hesitate to offer commercial mortgages unless you have the experience and business acumen needed to create a compelling application. 

HMOs vs MUFB

A HMO mortgage is specifically for property that is shared by multiple tenants (usually 3 or more) who are not from the same family. Facilities like bathrooms and kitchens are usually shared within the property. HMOs are an attractive investment option because each tenancy is under a different agreement so potential rental voids are spread out. Lots of lenders are willing to offer HMO mortgages with LTVs of up to 80%. 

An MUFB describes one freehold with multiple self-contained units where each tenant signs an AST. They carry many of the same benefits as a HMO, promising the same security in terms of rent with the additional versatility of being able to carry out works on specific units without disturbing other residents like you would in a HMO. Since they provide better access to facilities, MUFBs command higher rental prices than a place in a HMO. 

However, due to the more complex nature of MUFBs some lenders may hesitate to support your application. That's why you need Rangewell on your side. 

Why should investors consider an MUFB mortgage?

Splitting your property into an MUFB, or buying an existing one, means you'll be taking control of a property that offers multiple income streams from a single site. This helps you generate income even when you don't have a full complement of tenants.

Because each unit offers a private entrance and living facilities, units command higher rental yield compared to similar HMO properties. MUFBs typically lead to much higher income provided you can maintain good tenancy rates throughout your ownership journey. 

In addition, operating an MUFB as a rental property isn't the only way you can leverage it as an investment. You can also split the units into individual titles and sell them on for profit once you're no longer interested in operating as an MUFB landlord. 

How to get an MUFB mortgage

Your approach to securing a mortgage on your MUFB depends on your current property assets and your plans for the future. If you already own an MUFB and want to mortgage it, you'll need a lender who supports the MUFB model with BTL mortgages or similar products. 

If instead you intend to purchase a freehold and develop the self-contained units required in an MUFB, you'll need development finance to help carry out the project. Once completed, you'll then need to remortgage to a longer-term loan. Rangewell can help guide you through this process and secure a better offer. 

However, in both cases, the questions and considerations a lender may have are commonly: 

• How will you treat ownership in terms of company structure? Lots of MUFB buyers split ownership of freehold and leaseholds between subsidiary companies. How you intend to structure your business will impact your ability to get a loan. 
• Some lenders set limits on the number of flats within an MUFB – this is often a maximum of 10. If the property has more than that, you’ll need support from a specialist like Rangewell to help you find adequate finance. 
• Lenders want to know more about the property itself. They'll review:
  • The minimum size of each unit within the property.
  • The average value of each unit and the property as a whole block.
  • Investment projections and long-term forecasts.
  • The planning status of the property (some MUFBs have split a few units under different lease but can still operate the rest under one freehold).
• Research the area before pursuing a purchase, as some locations will have higher demand for MUFBs than others. In areas popular with students, you may be better off finding an HMO to invest in. Lenders will assess the potential value of the business before making a decision, so early research helps strengthen your case.
• Lenders will expect a MUFB to return enough profit from rental yield to cover any associated mortgage payments, so make sure you do any calculations and forecasts ahead of time to improve your chances. 

We can talk through all of these factors and more when you speak to our team. Get in touch now if you’re considering a MUFB acquisition, and see how we can get you a successful MUFB mortgage without any of the frustrations. 

Development finance for MUFB conversions

Some property developers choose to create MUFB properties by converting a large single-use property into self-contained units. Doing so carries significant development costs, not only to alter the structure of the building but also to outfit each unit with the required facilities. 

When carrying out this development work, you'll need to understand the minimum requirements of rooms within an MUFB. Failure to meet them will mean a lender will reject your application and you'll be in breach of property law. 

If you'd like to set yourself up for success, speak to Rangewell at an earlier date during your development plans so we can secure the right type of property development finance and advise you on how to structure your appliation to find the best possible lender for your project. We can also assist with refinancing other types of finance upon completion into an MUFB mortgage. 

Finding MUFB mortgage lenders

To find MUFB mortgage lenders, you can speak to our team and cut down on wasted time and effort. We’ll talk through your plans, advise you on the right lenders and even negotiate on your behalf to ensure you get the best possible rates and terms. 

Whilst mainstream lenders may be hesitant, there is still a wide range of lenders in the market who are willing to support your investment. They will typically offer up to 75% LTV, but this can be flexible depending on your discussion with the lender. 

To maximise your chances and get the best possible rates, speak to Rangewell today.