Leasehold Mortgage

Richy0317

Hi all,

A few years ago I bought my current home, A two bedroom Coach house. 

After moving in I worked hard to get all my finances in order - Paid off all other debts, raised a six month emergency fund (saved in an easy access ISA) and regularly contributing to a Stocks and Shares ISA. 

My next goal was to pay off my mortgage by Apr 2029. I’m on a tracker mortgage which allows me to overpay without penalty. For the last year I have been overpaying and all is on track to achieve my goal. 

However, I often wonder if I’m doing the right thing as my property is a Leasehold (108 years remaining) so effectively I will never truly own the property. 

This was never intended as a forever home but my motivation to pay off the mortgage was seeing it almost as a savings pot where I would have considerable equity built up for when I come to sell and move to something better when the time is right. 

Any comments suggestions hints or tips would be appreciated. 

Thanks,

Richy

Sarahspangles

Have you investigated the cost of buying out the leasehold?

Richy0317

Hi Sarah, 
I’ve not looked into that yet but it is a good shout. 

I imagine it will be complicated. As it’s a coach house, essentially a flat on top of two garages, I assume I would also have to buy my neighbours garage. 

It would be interesting to understand if buying out the lease would have much impact on the value. 

Sarahspangles

Richy0317 said:

Hi Sarah, 
I’ve not looked into that yet but it is a good shout. 

I imagine it will be complicated. As it’s a coach house, essentially a flat on top of two garages, I assume I would also have to buy my neighbours garage. 

It would be interesting to understand if buying out the lease would have much impact on the value. 

I think it’s more that not buying the lease will affect the value. The .gov.uk site suggests 125 or 99 year leases are common. It’s interesting that they mention leases with less than 80 years to run as a) impacting ability to get a mortgage and b) being more expensive to buy or extend - presumably because the freeholder knows you’re in a cleft stick! So if you were selling in future, a buyer would be facing those issues within the timescale they would be owners, and this might affect the sale price.

https://www.gov.uk/government/publications/buying-or-owning-a-leasehold-property/buying-or-owning-a-leasehold-home

We recently sold an inherited property that was leasehold. The new owners bought the freehold simultaneously with the property, having established that there was less than 99 years left on the lease. Even though it cost more than 30x the ground rent. However not all buyers would be able to raise the extra capital on top of their deposit,

I’m sure people on the house buying board will know how to calculate the likely price and whether it’s worthwhile pursuing. The fact your property extends over another won’t change, it just means you are dealing directly with the garage owners if one of you has an issue.

peb

Honestly, it's not an issue.  You have plenty of time on the lease and you can extend under statutory rules , you should do this before the lease term is less than 90 years.

NB coach house as you describe.is usually freehold with the garages leased out from that freehold.  Check out your title.

eddddy

 Just to clarify some points made in this thread.

 There are typically 2 ownership models for coach houses:

 Example 1

• - @Richy0317 owns the freehold building
• - @Richy0317's neighbours lease their garages from @Richy0317 (So the neighbours own leasehold garages)

Example 2

• - Somebody else (e.g. the developer) owns the freehold building
• - @Richy0317's leases their home from the freeholder (i.e. @Richy0317 owns a leasehold home)
• - @Richy0317's neighbours lease their garages from the freeholder (So the neighbours own leasehold garages)

It sounds like you have example 2.

In that case, leasehold law would consider your property to be a flat. You won't have the statutory right to buy the freehold. But you will have the statutory right to extend your lease, if you want to

(In theory, the owner of the freehold could voluntarily agree to sell you the freehold, but that's unlikely - and it would be a very messy process.)

Richy0317 said:

My next goal was to pay off my mortgage by Apr 2029. I’m on a tracker mortgage which allows me to overpay without penalty. For the last year I have been overpaying and all is on track to achieve my goal. 

However, I often wonder if I’m doing the right thing as my property is a Leasehold (108 years remaining) so effectively I will never truly own the property. 

I'm not sure that I follow your logic here.

You seem to be saying that you might not pay off your mortgage by 2029, because the property is leasehold.

Why does the property being leasehold make it a bad idea to pay off your mortgage by 2029?

South_coast

Agreed. I paid off my leasehold flat in 2021, and hey I own it! Leasehold doesn't mean you don't own it, it belongs to you exclusively for the duration of the lease (another 958 years in my case), and you can sell, bequeath, continue to live in it etc as you wish

LadyWithAPlan

They also are looking to change the law on leasehold now  … 

The next stage in leasehold reform will take place when the Leasehold and Freehold Reform Bill receives Royal Assent, likely to be in mid-2024 at the earliest, assuming a general election isn't called before then. The Bill was introduced to the House of Commons on 27 November 2023 and is now in the House of Lords.

- even if you move you will have an extra large deposit to your new home if you overpay . Plus having no mortgage will allow you to use your extra free income to save hard for your future and other things including a new home if you choose