Mortgage on High Rises and Blocks of Flats

High-rise flats often mean convenient city centre locations and great value for money, either as a place to make a home or a buy to let investment, but getting finance for this type of property isn’t always straightforward.

In this article we’ll look at your mortgage options for a high-rise, whether it’s buying a single flat or an entire block. We’ll talk you through the types of finance available, eligibility criteria and how a specialist mortgage broker can help you get the best deal.

Can you get a mortgage on a block of high-rise flats?

Yes, it’s definitely possible, it just depends on the property. When you’re looking to buy an entire building, this is normally classed as a multi-unit freehold block – a MUFB – and you’d be taking out a specialist multi-unit mortgage. A multi-unit block is simply a collection of separate flats, all held by one landlord as a single freehold, with no individual leaseholds on any of the properties.

A MUFB could be anything from the conversion of a property into individual apartments through to a large purpose built block of flats.

Eligibility criteria

Anyone applying for a multi-unit mortgage will have to meet their lender’s eligibility criteria, and this can vary considerably depending on where you go. Because of this it’s useful to find a mortgage broker who specialises in this form of finance before you start your search, as they’ll have existing relationships with lenders and be able to find the best deal to match your unique circumstances.

Some of the factors you should consider include:

• Deposit – most lenders will be looking for a maximum LTV of 75%, although you may be able to find 80% in particular circumstances.
• For multi-unit mortgages, lenders prefer landlords with some letting experience. It’s not a deal breaker though, so if this is your first investment then your broker may still be able to find you a lender.
• You’ll need to show that your predicted rental income is going to match lender’s expectations – most impose a minimum rental income they’d expect to see as a percentage of the monthly mortgage repayments, often around 145% for individual landlords. For limited company landlords this can be lower.
• The number of units in the block may restrict which lenders you can approach. Some won’t have a limit, but these tend to be the more specialist lenders. Where a cap is imposed, it’s rarely higher than 20 and in some cases it can be as low as three, so this is going to be a key factor in your search for finance.
• The property type will also have an impact on how keen lenders are to finance the project. A brand new, purpose built block for example will be easier to fund than a non-standard construction property, such a concrete block, or a building that is listed with restrictions in place around renovation or usage.

How to get a multi-unit mortgage

The key to securing finance for a multi-unit block is the planning. With a few simple steps you can put yourself in the strongest possible position for getting that yes on your mortgage application.

Find a broker who specialises in multi-unit mortgages

Demand for rental properties is currently strong, and yields for MUFBs tend to be better than on standard buy to let properties, meaning a multi-unit investment has many benefits, but that doesn’t make it easy. Interest rates tend to be higher than typical BTL mortgages and with eligibility criteria varying so much between lenders you’ll need the expert support of a broker who works specifically in this type of borrowing.

On big investments even a tiny difference in interest rates can mean huge savings or extra costs and so having an expert broker research and negotiate on your behalf could save you thousands.

Get in touch and we can match you with a broker we work with who has experience arranging these mortgages.

Put together a strong business plan

The better a case you can present, both for your property and for yourself, the better chance you’ll have of securing finance. Lenders will be interested not only in projected rental yields, but also your experience as a landlord and the local rental market. In most cases, especially when it’s for larger MUFBs, applications will be considered on a case by case basis, and being able to demonstrate your value and a strong local demand for this type of property is key.

Find the right multi-unit mortgage for you

For a large investment project like this there definitely isn’t a one size fits all mortgage, and you’ll have plenty of decisions to make, including whether you want an interest only mortgage or a capital repayment mortgage. There will be pros and cons to every option depending on your circumstances and your broker’s guidance will be invaluable.

Which lenders offer them?

Multi-unit mortgages tend to be the reserve of specialist lenders and building societies rather than the high street banks, and terms and conditions vary significantly.

Foundation Home Loans for example will consider multi-unit mortgages but with a cap of 10 units, and they don’t accept first time landlords. Loans of up to £750,000 will be subject to a minimum 25% deposit and up to £1million it will rise to 35%.

The Family Building Society on the other hand imposes strict caps on multi-unit mortgages at three units per building over no more than two storeys and they have a minimum deposit requirement of 35%.

Refinancing an entire apartment building

It’s entirely possible to remortgage a multi-unit block if you’re wanting to switch to a better deal or release equity for another investment. Your broker will be able to advise you on this and help you decide if it’s the best course of action according to your needs. It may be that another option is more suitable, so do get professional advice before you proceed.

How easy is it to get a mortgage on a single high rise flat?

Unfortunately this is very much a ‘how long is a piece of string?’ type of question, as it depends not only on your personal circumstances but also on the property type. Whether or not you want to live in the property or rent it out will also impact the type of mortgage you need. 

If you’re looking to buy a single high rise flat as a rental property then you’ll need a standard buy to let mortgage rather than a multi-unit mortgage, and you’ll need to show expected rental yields are high enough to cover repayments. If you want to live in the flat yourself, finance will come from a residential mortgage and the lender will want to check the usual things like affordability, your credit record, deposit and other personal circumstances.

In either case the lender will also want to assess carefully other factors that could increase their risk exposure. In the case of buying a high rise flat this could include things like the overall height of the building, which floor your flat is on, whether it’s a council flat or a flying freehold, and any cladding or other issues to do with non-standard construction. 

Get matched with a broker experienced in high rise flat mortgages

While it is a little trickier to find finance for flats in a high rise, it’s by no means impossible as long as you have the right expert support backing you up. Whether you’re looking for a residential mortgage for a high rise flat or a multi-unit mortgage for investment purposes, we can match you with a broker who has just the right experience and expertise for you.

Save yourself valuable time and effort seeking out those specialist lenders and instead put the research process in the hands of one of our advisors. Give us a call on 0808 189 2301 or make a quick online enquiry and assess your needs today.