HMO vs MUFB finance: what's the difference?
HMO and MUFB finance are often discussed together, but they are not the same thing.
The simplest distinction is this: an HMO is about how a property is occupied; an MUFB is about how the property is divided into separate units.
A House in Multiple Occupation is typically occupied by multiple households who share facilities. A Multi-Unit Freehold Block, or MUFB, usually contains two or more self-contained residential units under one freehold title.
That distinction matters to lenders.
An HMO might be a large house converted into several bedrooms, with tenants sharing a kitchen and communal areas. An MUFB might be a house converted into three self-contained flats, or a small block containing several flats under one freehold title.
The difference can affect the type of mortgage available, how the property is valued, how rental income is assessed, planning and building regulation considerations, lender experience requirements and maximum LTV.
Planning classification is also important. In England, small shared houses occupied by three to six unrelated people can fall within C4, while larger HMOs can be sui generis. Local planning restrictions can also apply.
There isn't a universal answer as to which is better. The right structure depends on the property, the investment strategy and the lender market.
At Eastgate, we look at the property as a whole before deciding whether HMO, MUFB or another form of specialist residential finance is most appropriate.
