A multi-unit block (MUB) is defined as a property comprising multiple separate units held under a single freehold title. For portfolio landlords, there are several advantages to investing in MUBs, rather than single-unit properties: MUBs also tend to have much higher rental yields. The average yield acquired by a multi-unit block in Q3 of 2021 was 8.4%, significantly higher than a standard buy-to-let property, which has an average yield of 5.4%. MUBs also allow landlords to spread their risk over several tenancies, reducing the possibility of rental voids. However, since MUBs are specialist mortgages, complexities can arise when landlords want to mortgage or remortgage their property.
Our client was a portfolio landlord seeking to refinance a multi-unit freehold block to free up extra capital, which would allow him to pursue other investments. MUBs are significantly more complicated to refinance than single-unit properties. For the lender, the level of risk is more complicated to calculate than on a single buy-to-let property, and in the event of a repossession, MUBs can be more difficult to sell than single buy-to-lets. When refinancing a MUB, it is essential to use a specialist mortgage advisor who understands the quirks of this particular type of property.
Mainstream lenders are unwilling to take on the level of risk associated with refinancing a MUB. Our second challenge was that our client’s primary source of income came from renting out their properties to tenants, adding further risk. We worked with the client to find a specialist lender who was willing to refinance the property. The agreed rate was higher than average due to the risk associated with the transaction, as to be expected.
When refinancing a MUB, it is essential to use a mortgage advisor who works with lenders who provide specialist mortgages. largemortgageloans.com specialise in bespoke financial solutions.