Advice about ‘cash buyer only’ property buying

EnolaHolmes

Hoping for some advice or feedback if people have had experience in buying a flat like this like this. 

I’m trying to buy a 1 bed flat in London. There is a great flat for sale with a lease of 48 years, with a low price, so they are asking for cash buyers.  I have 75% of the purchase price.  Would it be possible to get a loan to pay the rest? I think I could possibly get a mortgage for it too, though the seller might not want to wait around for this.    

I guess the lease extension is likely to be pricey too.  It seems a complicated gamble, but it is so much nicer and bigger, with a garden, than anything else and it would be within my budget. Or are the hidden costs too much?

(Probably by the time I’ve posted this, it’s been snapped up by a property developer, but it’s worth asking in case something similar comes on the market in the future.)

_Penny_Dreadful

EnolaHolmes said:

Hoping for some advice or feedback if people have had experience in buying a flat like this like this. 

I’m trying to buy a 1 bed flat in London. There is a great flat for sale with a lease of 48 years, with a low price, so they are asking for cash buyers.  I have 75% of the purchase price.  Would it be possible to get a loan to pay the rest? I think I could possibly get a mortgage for it too, though the seller might not want to wait around for this.    

I guess the lease extension is likely to be pricey too.  It seems a complicated gamble, but it is so much nicer and bigger, with a garden, than anything else and it would be within my budget. Or are the hidden costs too much?

(Probably by the time I’ve posted this, it’s been snapped up by a property developer, but it’s worth asking in case something similar comes on the market in the future.)

I doubt you'll get a mortgage for a property with just 48 years left on the lease, hence the cash buyers only.  Many personal loans say they cannot be used for purchasing property in their T&C so that's something you would need to check.

Extending a lease with only 48 years on it will be expensive.  You can get an estimate of the cost using the link below.  The shorter the lease gets the more expensive it will cost to extend.

https://www.lease-advice.org/calculator/

EnolaHolmes

Thank you! I think some companies do specialise in mortgages for shorter leases (though need to look into it further.) The leasehold calculator only works if the lease is 80 years or more, unfortunately.

_Penny_Dreadful

EnolaHolmes said:

Thank you! I think some companies do specialise in mortgages for shorter leases (though need to look into it further.) The leasehold calculator only works if the lease is 80 years or more, unfortunately.

I'd be surprised if any lenders will go as low as 48 years.  70 years is the lowest for most mortgage lenders.

This link gives some estimates of the costs involved.  It only goes down to 60 year leases so extending that 48 year lease is going to be even more expensive.

https://www.moneysavingexpert.com/mortgages/extend-your-lease/

EnolaHolmes

I don't want to break the forum rules by posting links, but a quick search suggests there are companies who specialise in this, if you search for 'mortgage lending low lease.' I don't know how easy or how advisable it is to go this route- hence asking here if people have done it before!

lincroft1710

I don't know how to put this without causing offence but I will try.


Unless you see this as your final home I wouldn't touch it with a bargepole as when you come to sell the lease will be shorter and the property less valuable,

arthurdick

I am just using made up figures, guessing at the price of the property and the ground rent,  and I plumbed in 46 years left on the lease, you have to live there 2 years before you can  start looking at extending, unless of course you get the seller to start the ball rolling.. With these made up figures, here is the rough cost of extending. I really do doubt though that you would get a mortgage or loan, you could get a family loan from a relative. 


ETA I am not sure if I have used it right, but whatever it will be, I doubt if it would be worth doing.. As the person upthread pointed out,, Bargepole does spring to mind.

eddddy

lincroft1710 said:

I don't know how to put this without causing offence but I will try.


Unless you see this as your final home I wouldn't touch it with a bargepole as when you come to sell the lease will be shorter and the property less valuable,

I think most people would investigate it as a opportunity to make money - both owner/occupiers and investors.

Buy the property for £a, pay £b for a lease extension - and end up with a property that's worth much more that £a+£b.


But it relies on things like...

• Having funds / finance to cover both the property price and the lease extension price (and the fees)

• Accurately predicting what a lease extension will cost

• Going through the hassle of doing a lease extension

• And/or taking a risk by buying it and waiting - and hoping that the government's leasehold reforms materialise, resulting in cheaper lease extensions 

• (And making sure that the flat is eligible for a statutory lease extension)
  

EnolaHolmes

Thanks all! It would be worth the cost (even with the cost of a lease extension) and it would be a place to live, rather than one to sell. As guessed, by the time I spoke to the agent it was under offer - I'm guessing by someone who will do it up and flip it, which is frustrating!

SDLT_Geek

EnolaHolmes said:

Hoping for some advice or feedback if people have had experience in buying a flat like this like this. 

I’m trying to buy a 1 bed flat in London. There is a great flat for sale with a lease of 48 years, with a low price, so they are asking for cash buyers.  I have 75% of the purchase price.  Would it be possible to get a loan to pay the rest? I think I could possibly get a mortgage for it too, though the seller might not want to wait around for this.    

I guess the lease extension is likely to be pricey too.  It seems a complicated gamble, but it is so much nicer and bigger, with a garden, than anything else and it would be within my budget. Or are the hidden costs too much?

(Probably by the time I’ve posted this, it’s been snapped up by a property developer, but it’s worth asking in case something similar comes on the market in the future.)

Thinking outside of the box, occasionally sellers are prepared to effectively lend a buyer some money by leaving part of the price outstanding.  So here you would pay them 75% of the purchase price in cash, and owe them the other 25% secured on a mortgage back.

There are likely to be complications, even if it happened to be attractive financially to the seller.

RHemmings

eddddy said:

lincroft1710 said:

I don't know how to put this without causing offence but I will try.


Unless you see this as your final home I wouldn't touch it with a bargepole as when you come to sell the lease will be shorter and the property less valuable,

I think most people would investigate it as a opportunity to make money - both owner/occupiers and investors.

Buy the property for £a, pay £b for a lease extension - and end up with a property that's worth much more that £a+£b.


But it relies on things like...

• Having funds / finance to cover both the property price and the lease extension price (and the fees)

• Accurately predicting what a lease extension will cost

• Going through the hassle of doing a lease extension

• And/or taking a risk by buying it and waiting - and hoping that the government's leasehold reforms materialise, resulting in cheaper lease extensions 

• (And making sure that the flat is eligible for a statutory lease extension)
  

This sounds very interesting to me. In terms of accurately predicting what a lease extension will cost, I'm wondering what might happen if a person approaches the freeholder, says that they are interested in buying the property and extending the lease, and working out how much that will cost ahead of time. As it's a bunch of cash for the freeholder, which hopefully would motivate at least some freeholders to cooperate.