Freehold v Leasehold?

purplesmiler82

FTB and dont know that much about leasehold. Have viewed a couple of freehold properties but also seen a leasehold apartment with 125 year lease, £1 ground rent and £300 per annum service charge.

Just wondered what the disadvantages of a leasehold property are? will it make any difference to the mortgage amount we can borrow etc

Thanks

Ian_W

purplesmiler82 wrote: will it make any difference to the mortgage amount we can borrow etc

Most lenders [does vary] require a minimum period of unexpired lease at the END of the mortgage term, typically 30yrs, so with a 25yr mortgage they won't lend if the remaining lease is less than 55yrs. As the lease gets shorter the valuation may also be less. However, there are rights to extend and even buy the lease. See THIS SITE for a far more detailed explanation.
Otherwise, in terms of mortgages, the difference between LONG leasehold and freehold are small, slightly higher legal charges when remortgaging for example. Otherwise shouldn't affect how much you can borrow.

In more general terms Freehold is better because you own the land below and the air above but on a long lease [our's is a leasehold house with 960yrs left on a 999yr lease] the practicle differences are minimal. Much though I'd like to think the end of the lease is going to be a worry for me in old age - somehow I don't think it will be!!

Flats are different, almost all are leasehold for obvious reasons. Things to consider about the lease are: remaining length, ground rent, annual charge for communal areas & buildings insurance, who owns the freehold. Best IMO is if freehold is owned jointly by leaseholders rather than a 3rd party but that's not always the case. If the grounds, building and communal areas look well maintained it's usually a good sign.

Overall, if the property is right for you I wouldn't be put off buying because it's leasehold unless any of the issues above appear problematical.
BoL.

EdInvestor

It's very important to check the lease thoroughly.In particular,should you think you might want to rent the property out in future, make sure there are no restrictions of costs attached to that. Don't leave this to the solicitor.

Best IMO is if freehold is owned jointly by leaseholders rather than a 3rd party but that's not always the case.

That can be good, but can also be bad.If all the leaseholders are skint and won't pay for things like cleaning and painting, then the property can easily deteriorate, which affects your quality of life and resale value.If there's one "problem" leaseholder who won't pay up for somthing important like insurance or the sinking fund, who will enforce the lease? It can be easier to have an outside freeholder rather than have to do it yourselves to a neighbour who lives next door.

On the other hand, greatly to be avoided are absent freeholders who employ expensive managing agents who charge high fees for doing little work.

As Ian says, if the property is well maintained, clean and tidy, that's probably a good sign that whatever system is in place is working well.