Buyers mortgage rejected on 84 year lease

Melziejane

kingstreet said:

IMHO the buyer should change lender. It will be quicker.

She's using a mortgage broker who's advised her for a shared ownership mortgage 85 years is standard 🤷‍♀️

eddddy

Melziejane said:

So yes we would need a valuation to find the premium we'd have to pay, on top of that we need to pay

£850 + vat valuation fee
£750 + vat their solicitors fees
£100 + vat admin fee

Normally, you'd want to pay your own solicitor as well to check the extension details, etc.

But if you're doing an extension on completion, it's probably your buyer's solicitor who will be more interested in checking stuff.

But if your buyer drops out for any reason (after you've spent money), maybe you want to be prepared with a Plan B.

Melziejane said:

So a mortgage company would be happy with a lease extension on completion? 

Yep - they should be. But ask the buyer and their solicitor to check.

But you'll need the Housing Association's cooperation. e.g. They'll need to agree to exchange contracts and complete on the same days that you do.

Melziejane said:

Also we are happy (not really) to pay for the lease extension so our buyer doesn't have to so how would that work?

That's just an accounting detail.

For example, using made-up numbers (assuming you've currently accepted an offer of £250k)..

• The buyer pays £250k... and £240k goes to you, and £10k goes to the HA for the lease extension

You can describe that to the buyer in either of 2 ways...

1. The price of the property is £250k with an extended lease
2. The price of the property is £240k plus an extra £10k for the extended lease

kingstreet

There are some lenders who don't do SO (NatWest for one) and there are others who are well-known for it (Kent Reliance.) In the middle are normal high street lenders who accept such cases, subject to criteria, and they don't differentiate between standard and SO property for their lease criteria.

As an example, Halifax min lease term is 70 years and it doesn't mention it being different for SO. Nationwide is higher of 55 years, or mortgage term + 30 years. If other issues are affecting the borrowers and they are unable to use high street lenders, that is a different matter.

Any idea of current lender chosen?

Melziejane

eddddy said:

Melziejane said:

So yes we would need a valuation to find the premium we'd have to pay, on top of that we need to pay

£850 + vat valuation fee
£750 + vat their solicitors fees
£100 + vat admin fee

Normally, you'd want to pay your own solicitor as well to check the extension details, etc.

But if you're doing an extension on completion, it's probably your buyer's solicitor who will be more interested in checking stuff.

But if your buyer drops out for any reason (after you've spent money), maybe you want to be prepared with a Plan B.

Melziejane said:

So a mortgage company would be happy with a lease extension on completion? 

Yep - they should be. But ask the buyer and their solicitor to check.

But you'll need the Housing Association's cooperation. e.g. They'll need to agree to exchange contracts and complete on the same days that you do.

Melziejane said:

Also we are happy (not really) to pay for the lease extension so our buyer doesn't have to so how would that work?

That's just an accounting detail.

For example, using made-up numbers (assuming you've currently accepted an offer of £250k)..

• The buyer pays £250k... and £240k goes to you, and £10k goes to the HA for the lease extension

You can describe that to the buyer in either of 2 ways...

1. The price of the property is £250k with an extended lease
2. The price of the property is £240k plus an extra £10k for the extended lease

Really helpful! Thank you very much for the detailed responses. 

Melziejane

kingstreet said:

There are some lenders who don't do SO (NatWest for one) and there are others who are well-known for it (Kent Reliance.) In the middle are normal high street lenders who accept such cases, subject to criteria, and they don't differentiate between standard and SO property for their lease criteria.

As an example, Halifax min lease term is 70 years and it doesn't mention it being different for SO. Nationwide is higher of 55 years, or mortgage term + 30 years. If other issues are affecting the borrowers and they are unable to use high street lenders, that is a different matter.

Any idea of current lender chosen?

Interesting! I don't know which lender she used but I know she's using a mortgage broker so I assumed they'd look at all lenders? 

kingstreet

Melziejane said:

kingstreet said:

There are some lenders who don't do SO (NatWest for one) and there are others who are well-known for it (Kent Reliance.) In the middle are normal high street lenders who accept such cases, subject to criteria, and they don't differentiate between standard and SO property for their lease criteria.

As an example, Halifax min lease term is 70 years and it doesn't mention it being different for SO. Nationwide is higher of 55 years, or mortgage term + 30 years. If other issues are affecting the borrowers and they are unable to use high street lenders, that is a different matter.

Any idea of current lender chosen?

Interesting! I don't know which lender she used but I know she's using a mortgage broker so I assumed they'd look at all lenders? 

No way of knowing. Those of us who specialise in SO, newbuild etc tend to know who to favour or avoid so it may be other issues taking them down the route of a particular lender.

BTW have you spoken to the HA about a new lease from completion for the buyers? I've known this happen in the past on one or two occasions.

housebuyer143

Melziejane said:

The difference here is it's a shared ownership property so cash buyers isn't an option and property value is "capped" for affordable homes. 

Begrudgingly we will pay for the lease extension (otherwise we can't move) but I just can't figure out if a mortgage company will lend while it's in process? Otherwise we'll probably lose our buyer if she has to wait until the lease extension is completed before applying for a mortgage again. 

My mate has an offer while the lease extension is on going but it's taken 7+ months... It might not be smooth sailing even if you get the offer through. Extend it as a matter of course regardless.

eddddy

housebuyer143 said:

My mate has an offer while the lease extension is on going but it's taken 7+ months... It might not be smooth sailing even if you get the offer through. 

I suspect that's a statutory lease extension - and it's taken 7+ months because the leaseholder and freeholder are negotiating because they can't agree on a price.


The OP will be doing an informal lease extension with a Housing Association, and the price will probably be whatever the the RICS valuer values the lease extension at. 

It will probably be a "take it or leave it" price with no negotiation. So it's more a case of the solicitors checking everything, and then getting the right people lined up to sign the documents.

NameUnavailable

This will be an 'informal' lease extension so could happen very quickly as long as the HA don't try to sneak a ground rent increase in the deal as well!

Speak to the HA and see what they say about timescales. Also, until you know how much it's going to cost how do you know you'd be 'happy' to pay for it? What hit are you willing to take? It's probably going to be a fairly signficant sum.

eddddy

NameUnavailable said:

This will be an 'informal' lease extension so could happen very quickly as long as the HA don't try to sneak a ground rent increase in the deal as well!

The Leasehold Reform (Ground Rent) Act 2022 means that the ground must be reduced to a peppercorn (zero).