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Getting a Leasehold Mortgage

Leasehold properties are widely available in the UK and if you’re interested in leasehold ownership, you will likely want to know about your mortgage options.

In this guide, we will tell you how leasehold mortgages work and will explain the eligibility criteria set by most mortgage lenders.

Keep reading to learn more and then get in touch with our team if you have any questions after reading this guide.

What is a leasehold property?

Most flats are leaseholds but some houses can be leaseholds too. When buying a leasehold property, you own the property for a set period of time but not the land on which the property sits.

As leases can be very long – sometimes up to 999 years – you usually don’t have to worry about losing your home. But it’s still worth knowing the differences between buying a leasehold and a freehold property when looking at your housing options.

What makes a leasehold different from a freehold?

A property can be purchased on either a leasehold or a freehold basis.

With a leasehold, you own the property until the lease expires which can be anywhere between 40 years to 999 years, depending on the leasehold agreement.

But while the property is effectively yours until the lease expires, the ground the property is on is owned by the freeholder. As such, you may have to pay the freeholder ground rent and service charges while you remain within the property.

With a freehold, you own both the land and the property for an unlimited period. As such, you don’t have to worry about a lease expiring or paying any ground rent or service charges.

Can you get a mortgage on a leasehold property?

Yes, it is definitely possible to get a mortgage on a leasehold property but your mortgage chances will depend on how long is left on the lease.

Lenders have their own rules around minimum leasehold terms but generally speaking, you are more likely to get a leasehold mortgage if the lease is at the upper end of the spectrum.

This isn’t to say you can’t get a mortgage for a short leasehold property but as fewer lenders offer mortgages for these, it is often to wise to use the services of a mortgage broker such as ourselves when searching for the appropriate lenders.

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Eligibility requirements for a leasehold mortgage

The eligibility requirements for a leasehold mortgage are very similar to those on a standard mortgage but there are a few differences which can make the mortgage process a little more challenging for leasehold buyers.

The main eligibility requirements for getting a leasehold mortgage are detailed below.

  • Time remaining: Shorter leases, such as those that fall below 80 years, impact property values which is why it can sometimes be tricky to get a mortgage. This is because lenders are worried that they might be left with a property that is worth less than the loan they gave if the owner defaults on their mortgage. Ideally, you should look for a property with a longer lease instead of a short lease to improve your mortgage chances.
  • Loan-to-value (LTV): When it comes to the loan-to-value (LTV) ratio, some lenders have stricter requirements for leasehold purchases. The LTV will usually be quite low, especially if you are looking at buying a new build flat or house, so you may have to stump up the cash for a larger deposit.
  • Affordability: Before giving you a mortgage, lenders need to evaluate your ability to make the expected monthly repayments. As such, they will check your income and your spending to make sure you have enough money to pay for your mortgage.
  • Your credit history: Your credit history can impact the mortgage rates you are offered on both freehold and leasehold mortgages. If financial issues in the past have resulted in a low credit score, you may be ruled out of a mortgage or you may lose eligibility for the most attractive mortgage loans. Therefore, you should check your credit report before applying for a mortgage as it’s wise to build up your credit rating if it is particularly low.
  • Age: The closer you are to retirement the more difficult it can be to get a mortgage, especially if you’re hoping to get a mortgage with a term of 25 years or more. It is still possible to get a good mortgage deal if you’re of an older age but your chances will be improved if you turn to a specialist broker who can help you find the most appropriate lender. – What is the maximum age for a mortgage?

It has been my experience that you really do need to take careful consideration when buying a property with a lease that has a short term. You may be able to get a mortgage lender to give you a mortgage on the property however what will happen in a few years time and you want to sell the property and there is now even less time left on the lease? You could catch a cold as you would end up with a property that is now unmortgageable and therefore almost unsellable! – Grant Humphries

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How a broker can help with a leasehold mortgage

Before applying for any mortgage, it’s wise to seek professional advice from a mortgage broker as they will be able to help you get the most competitive mortgage deal.

As the buying process can be complicated when getting a mortgage on a leasehold basis, it’s especially important to turn to a mortgage broker for help, as they can give you the tailored advice you need.

They will let you know which lenders are more likely to give mortgages on properties with shorter leases, for example, and they will give advice on improving your eligibility.

The team at YesCanDo Money are experts on mortgages for leasehold properties so can help you if you’re currently looking for your ideal mortgage.

We will make sure you get a mortgage at the most competitive rates, regardless of the type of property ownership you are considering, and we will help you with every aspect of the mortgage application.

Examples of lenders offering mortgages for this type of property

There are lots of lenders willing to offer mortgages for leasehold properties but as they all have their own criteria, you should speak to a mortgage broker who will search the market for the most affordable leasehold mortgages for somebody in your situation.

High street lenders willing to consider leasehold properties include:

  • Santander – To be eligible for a mortgage with Santander, there must be at least 55 years left on the leasehold at the beginning of the mortgage and at least 30 years remaining on the lease at the end of the mortgage term.
  • Barclays – Unfortunately, Barclays won’t offer mortgages on properties with a short lease so if you want to be eligible for one of their deals, you should look for a leasehold flat or house with a minimum of 70 years on the lease.
  • Nationwide – It’s possible to obtain a mortgage with Nationwide however if you’re looking to buy a new build property, you will need a longer term on the lease. There must be at least 125 years remaining on the lease if you’re wanting to buy a new build flat and at least 250 years remaining if you’re hoping to purchase a new build house. Second-hand flats and houses come with lower requirements and the minimum length of the lease will depend on where the properties are located.

Remortgaging a leasehold property

If you would like to remortgage your leasehold home, you will need to let the freeholder know about your plans as the lender won’t approve your application without the freeholder’s agreement.

If the freeholder does agree to the remortgage, they may charge you a notice fee for the new loan charge on the property.

If you are given the go-ahead to remortgage, you should then find the most appropriate lender for your circumstances. We can help you in this regard.

The remortgaging process is less straightforward for leasehold houses and flats than it is for freeholds as additional conveyancing checks are required by most lenders. As such, the process can also be more expensive due to the conveyancing costs and the other additional costs, such as those charged by the lease administrator.

Refinancing to pay for a lease extension

People remortgage for different reasons but commonly, one reason why leasehold owners refinance their mortgage is to pay for a lease extension. This is because they want to raise the resale value of their homes and extend the lease before they sell the property.

Most lenders will let you remortgage but as they will have LTV caps and specific requirements, you should speak to a mortgage broker who will give you expert advice about all matters related to the remortgage process.

Buy-to-let (BTL) mortgages for a leasehold property

It’s definitely possible to get a buy-to-let mortgage for a leasehold property but as is the case when buying a freehold property as an investment, the lender will likely impose higher interest rates and lower LTV limits to counter the risk to themselves.

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The benefits and drawbacks of a leasehold property

Leasehold properties come with several benefits and drawbacks so it’s worth considering these before opting for a leasehold mortgage.

Leasehold benefits

  • Leasehold properties are typically cheaper than freehold properties
  • Due to lower purchase prices, leaseholds are a great way to get on the property ladder
  • The freeholder is responsible for the upkeep of any communal gardens or hallways
  • The freeholder is responsible for the maintenance of the building, such as roof repairs
  • Buildings insurance is usually covered by the freeholder

Leasehold drawbacks

  • You have to pay ground rent and service charges to help with the upkeep of communal areas
  • Ground rent and service charges may increase over time
  • The fewer years left on the lease the harder it will be to sell it
  • Conveyancing fees are higher when buying a leasehold
  • You won’t benefit from any increase in the land value
  • Interest rates are less competitive for properties with a shorter lease
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Speak with a leasehold mortgage expert

When buying a leasehold, there can be lots of different factors to consider. Because there are a number of specific areas that can impact your leasehold mortgage, expert guidance plays a crucial role in making sure you end up with the best mortgage deal and terms.

We offer a free, broker-matching service. This means we’ll quickly assess your needs based on the property you’re looking at. A mortgage adviser from our team who has a wealth of experience dealing with leaseholds will search the whole market to get you the lowest rate possible from a mortgage lender that will be happy with the property you want to buy.

Just call 033 0088 4407 or make an inquiry via WhatsApp or our contact form. We’ll set up a free, no-obligation chat with your mortgage broker today.

Frequently Asked Questions

You have the legal right to buy the freehold on your leasehold property if you have owned it for 2 years or more. The process will be more complicated if you’re in a flat as you will need to jointly buy the freehold with the other residents.

If the freeholder refuses to sell, you could refer them to the Leasehold Reform Act 1967 or use the services of a solicitor (via a First-Tier Tribunal) to help you with the purchase.

No, the two are very different. A leasehold agreement allows you to own a property for a fixed lease term whereas a mortgage is what you use to buy the property itself.

If you buy a leasehold property, you may be able to extend the period you own it for.

Extending a lease is a good idea if you want to live in your home for longer or raise the property value so you can sell it at a later date. You have the right to extend the lease term if you have lived in your home for 2 years or more. It’s best to extend it sooner rather than later as the costs you incur for extending the lease will be less.

The lease is a legal document that you should be given a copy of after purchasing the house. You can check this for the lease lengths to find out how long is left on your leasehold. If you don’t have a copy of the lease, you can obtain one from your mortgage lender or solicitor, or by ordering one from the Land Registry.

You should also check the lease length and other lease terms before buying the leasehold property to make sure you’re happy to go ahead with the purchase.

With a freehold property, you don’t have to pay ground rent, maintenance fees, or a yearly service charge, and the property and grounds are yours for an unlimited amount of time. Mortgage costs are generally cheaper too.

For these reasons, freeholds are better but if you’re looking for an affordable way to get on the property ladder, buying a leasehold property could be cheaper, despite the higher mortgage costs.

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Steve Roberts
Steve Roberts

Stephen Roberts MAQ is the founder of YesCanDo Money, one of the UK's largest no-fee mortgage brokers. With over 30 years of mortgage experience, he has advised and helped thousands of first-time buyers buy their first home and home movers buy their dream home. Speak to a mortgage expert today by completing our contact form:

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