Value of extended lease

miss_eagle

I have a query re: valuations for remortgaging and the relevance of lease length on a valuation.

We have a 2 bed flat that we want to remortgage (to buy to let). It has a 69 year lease - which we ideally want to extend in the next year or so. We had the property valued by an estate agent 4 months ago at £170k. He said a buyer would negotiate down based on the short lease.
The valuation done by the surveyor for the mortgage last week was £160k - crucially for us, coming in at less than we need for the lender to offer us the 75% loan we really need. (means we have to come up with money to make up the shortfall as well as extend the lease).

We thought the valuation was lower because it took into consideration our short lease. But our broker queried it and apparently it has no bearing until it reaches a 'critical ' level of about 50 years. Is this really the case? My understanding is that some lenders won't lend on properties with a lease less than 65 yrs - which we are fast approaching. So how can the length of lease have no affect on the valuation ??

(I have an issue with how the surveyor arrived at the £160k figure, apparently comparing with the sold prices of similar properties in the last 6 months as I am struggling to find suitable properties for comparison..... But there's probably nothing we can do about his valuation....)

Any thoughts welcome. Thanks.

miss_eagle

I should add for clarity that we had thought that extending the lease (which we need to do anyway) would increase the valuation, resulting in us borrowing only for the lease extension not for the mortgage shortfall as well. Any ideas why this is not the case please?

kingstreet

I need to go out and can't give you a tailored answer.

Some of the issues raised in here may be pertinent;-

https://forums.moneysavingexpert.com/discussion/4330249

miss_eagle

Thanks for the pointer.

Our issue specifically is that we don't wish to add the cost of the lease extension to the mortgage. We would borrow money (bank or family) to do this. We were under the impression (perhaps wrongly) that by extending the lease we would add to the value of the flat.

I don't understand how anything less than 80 years is considered a 'short lease', so we are definitely in short lease territory at 69 years, but extending the lease to 99 years for example makes no difference to the valuation. Any light anyone can shed on this please??

The same surveyor who said the lease extension would currently make no difference also said that it would be in our interest to do it soon otherwise when looking to sell we are open only to cash only buyers.
At what point would this be the case?