Mortgage Introducer July 2022

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Busting the MUB myths SO WHAT IS AN MUB?

Grant Hendry director of sales, Foundation Home Loans


andlords’ quest to maximise yield continues to drive interest across many areas of the buyto-let marketplace, particularly when it comes to houses in multiple occupancy (HMOs) and multi-unit blocks (MUBs). For context, the Q1 2022 Landlord Panel research from BVA BDRC outlined that average rental yields for HMOs were 6.8 per cent and 6.3 per cent for MUBs compared to an overall average yield of 5.5 per cent for all property types. In Q4 2021, 21 per cent of landlords reported owning at least one HMO. There has been plenty of commentary and many educational pieces in recent times around HMOs, but MUBs still tend to fly a little under the radar. And, from speaking with intermediaries on a regular basis, I can say that there remain a few misconceptions around lenders’ requirements for a mortgage on such property types.

An MUB is a freehold property that has been split into self-contained flats that are not subject to individual leases. This could include a block of flats or a house that has been converted into flats. BUSTING THE MYTHS

This is an important distinction to make, as a relatively common misconception remains that an MUB can be multiple houses or bungalows that are held under one freehold title. This is not the case. If this were the case, from a Foundation Home Loans standpoint, we would require the titles to be split on, or before, completion to enable us to mortgage each individual property. Another area that can sometimes be misinterpreted occurs when a borrower intends to reside in one of the properties; this is a common reason why these types of cases can sometimes be declined during the application process. MUBs can also easily be confused with HMOs. For example, a MUB does not have rooms that are let out individually to tenants who share basic amenities, such as kitchens and bathrooms. This would be classed as an HMO. If a landlord owns a MUB in which one or some of the units are not self-contained, we class this as a hybrid HMO MUB. It’s also important to reiterate that a multi-unit block is not a block of flats with separate leasehold titles. If a client owns a block of flats – all with separate leasehold titles – and a client or party connected to a client owns the freehold title, these would still be classed as leasehold flats rather than a MUB. THE VALUE OF A STRONG LENDING SUPPORT NETWORK

These differentials signify how important it is for advisers to establish relationships with lenders who have the underwriting capabilities to assess such cases on an



individual basis. It also demonstrates the value of having access to a good BDM, regional account manager, or a broker help desk to ensure that advisors fully understand the type of product their landlord clients actually need and whether and how they fit lending requirements, and to ensure that they have the correct occupancy status prior to the decision-in-principle submission. The quality and accessibility of this support network will become increasingly vital as this and other, more complex BTL product types become an increasingly appealing option for portfolio landlords, who are currently dominating purchase activity across the BTL market. MEETING SHIFTING LANDLORD DYNAMICS

To satisfy shifting landlord dynamics, lenders are constantly evolving their product offerings when it comes to rates, criteria, and fees. Changes within these product offerings – which are commonplace in the current economic environment – also highlight the benefits gained from landlords working closely with advisers who have strong knowledge of and experience in the BTL sector. For example, we have recently expanded our green mortgage range to include HMOs (up to eight bedrooms) and MUBs (up to 10 units), supporting those landlords to maintain the highest standards of quality for that sector. The MUB and HMO sectors are likely to see further activity and bespoke offerings emerge over the course of 2022 and beyond as more portfolio landlords tap into the opportunities that remain on offer throughout the BTL sector. This also signifies good news for the intermediary market, as these types of cases tend to require more of specialist advice because of their level of complexity and legislation. We look forward to supporting you. M I

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