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 possible. It just depends on the property. When you’re looking to buy an entire building, this is normally 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 to a large purpose-built block of flats.

Eligibility criteria

Anyone applying for a multi-unit mortgage must meet their lender’s eligibility criteria, which 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 want 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, your broker may still be able to find you a lender.
• You’ll need to show that your predicted rental income will match the lender’s expectations. Most lenders 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 will be a key factor in your search for finance.
• The property type will also impact how keen lenders are to finance the project. For example, a brand new, purpose-built block will be easier to fund than a non-standard construction property, such as a concrete block or a building listed with restrictions around renovation or usage.

How to get a multi-unit mortgage

The key to securing finance for a multi-unit block is planning. With a few simple steps, you can put yourself in the strongest possible position to get 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 those for 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. 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.

Even a tiny difference in interest rates can mean huge savings or extra costs on big investments, 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 for your property and yourself, the better your chance of securing finance. Lenders will be interested in projected rental yields and your experience as a landlord and the local rental market. In most cases, especially for larger MUFBs, applications will be considered on a case-by-case basis, and demonstrating 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 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. Depending on your circumstances, every option will have pros and cons, and your broker’s guidance will be invaluable.

Which lenders offer them?

Multi-unit mortgages tend to be reserved for specialist lenders and building societies rather than 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. They don’t accept first-time landlords. Loans of up to £750,000 will be subject to a minimum 25% deposit, and up to £ 1 million, 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 want to switch to a better deal or release equity for another investment. Your broker can 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 on your circumstances and 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 that expected rental yields are high enough to cover repayments. Suppose you want to live in the flat yourself. In that case, 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 related to 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 with just the right experience and expertise.

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. Call us on 0330 818 7026 or make a quick online enquiry and assess your needs today.