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and is authorised and regulated by the Financial Conduct Authority. Registered Office: 53 High Street, West Bromwich, B70 6NZ. Registered in England and Wales. FCA Number: 1032127. Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK.
There are two main ways of owning a property in England and Wales, Freehold and Leasehold. As a rule of thumb, houses are freehold and flats are leasehold. But, as with all rules of thumb there are exceptions and an ever increasing number of newly built houses are bought on a leasehold basis.
Freehold
A freeholder owns their property and the land it’s built on. Freehold gives you:
- Security, you own the property outright and you don’t have to worry about the lease running out
- Freedom to change or extend the property, assuming of course you get the necessary planning permissions
- No ground rent, services charges or any other landlord charges
Leasehold
You only own a leasehold property for a fixed period. Ownership of the property returns to the landlord when the lease comes to an end. That might sound alarming, but leases are generally long and as the owner, you have a legal right to renew once you have owned the property for two years. Of course this comes at a cost, which will be negotiated with the freeholder.
As a leaseholder, you have a legal agreement with the landlord, known as the ‘freeholder’ called a ‘lease’.
Mortgage lenders are happy with leasehold properties, providing they have a reasonable length of time remaining on the lease. Usually a minimum of 80 + years is required although some are happy to lend on shorter leases. You should also remember that properties with only a short term remaining on the lease may be difficult to sell let alone finance.
If you are considering buying a leasehold property, you should consider:
- How many years are left on the lease
- How many years will be left on the lease when you come to sell it
- The service charges, ground rent and other related costs, these can soon mount up and need to be budgeted for carefully each month
- The cost of extending the lease
- How the length of the lease might affect your ability to get a mortgage, and the property resale value