Getting a Mortgage for a Short
Lease property in the UK
If
you buy a flat it will either be freehold or
leasehold.
If
it is leasehold
then the freeholder will own the ground on which the block of
flats stands.
You
just buy the right to live in the building
for a set number of years - the number that the lease has to
run - and at the end of the lease, ownership of the property
reverts to the freeholder.
To live there you pay the landlord a ground rent,
as well as a service charge to manage any communal
areas inside and outside the building. Details of these will
be laid out in the lease for the property.
The longer the lease the more keen lenders will be to offer
you a mortgage. If a lease is below 70 years in length,
the value is diminished and it becomes a wasting asset.
Usually
lenders will set a minimum lease length
...from either the beginning or the end of the mortgage term.
Most lenders ask that it runs at least 30 years
after the end of the mortgage term.
If there is less than 25 years left on the lease at the end
of the mortgage it is very difficult to get a loan unless the
property is in a very desirable area. Homes in Mayfair, for
example, traditionally have very short leases.
If you own a flat in a leasehold block and
it goes below 70 years it is a good idea to get legal advice
about extending the lease. Although this will set you back a
few thousand pounds, it will add value to the property and make
it easier to sell.
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