Buying flat with 85 year lease - risky?
Discussion
Hi all,
As per title, I'm looking at buying a flat with an 85 year lease left. Will this make getting a mortgage hard (now or in near future) and thus could it be harder to sell in future?
What does a lease typically cost to extend? Apparently the freehold may be for sale soon - again, what would likely cost be? Just looking for very rough estimates.
First time buyer, so I know naff all here...hence very grateful for any advice from the learned scholars of PH.
Thanks.
As per title, I'm looking at buying a flat with an 85 year lease left. Will this make getting a mortgage hard (now or in near future) and thus could it be harder to sell in future?
What does a lease typically cost to extend? Apparently the freehold may be for sale soon - again, what would likely cost be? Just looking for very rough estimates.
First time buyer, so I know naff all here...hence very grateful for any advice from the learned scholars of PH.
Thanks.
When we bought a leasehold, about 10 years ago, mortgages were ok as long as the lease had 75 years left. That might not be the case anymore though.
I don't think it's possible to say how much the lease will cost to extend, owner/estate agent should be able to tell you.
My advise would be to put an offer in with the condition that the lease is extended up to 125 years. If you buy it without then you'll be stuck with extending before you sell it otherwise you'll put off a lot of buyers.
I don't think it's possible to say how much the lease will cost to extend, owner/estate agent should be able to tell you.
My advise would be to put an offer in with the condition that the lease is extended up to 125 years. If you buy it without then you'll be stuck with extending before you sell it otherwise you'll put off a lot of buyers.
85 years is no problem. It only really becomes an issue with less than 50 years but even then you can still get a mortgage from specialist places. Lease extensions vary massively in cost but are primarily based on the number of years to extend. Don't let 85 years put you off in the least.
The bit that confuses me in your post is this -
What does a lease typically cost to extend? Apparently the freehold may be for sale soon - again, what would likely cost be? Just looking for very rough estimates.
If the property is leasehold that is different to freehold. Most flats are leasehold and there is a freeholder that issues the leases to the flat owners. Leases are usually for 99 or 125 years from a certain date and they diminish as in your case to 84 years. The leaseholder can apply to have their lease extended back to the original term and the freeholder will issue this on the payment of a charge based on length of years to extend by and other factors.
Then there is the possibility that the property could become "share of freehold" in which as each flat owner buys a share in the free holding and as such they are the freeholders all together in a group.
You also need to find out who the management company is and what the maintenance charges are. Also you will want to know what has been done on the properties in the last two years. One thing that can really ruin a great flat is an awful management company.
What does a lease typically cost to extend? Apparently the freehold may be for sale soon - again, what would likely cost be? Just looking for very rough estimates.
If the property is leasehold that is different to freehold. Most flats are leasehold and there is a freeholder that issues the leases to the flat owners. Leases are usually for 99 or 125 years from a certain date and they diminish as in your case to 84 years. The leaseholder can apply to have their lease extended back to the original term and the freeholder will issue this on the payment of a charge based on length of years to extend by and other factors.
Then there is the possibility that the property could become "share of freehold" in which as each flat owner buys a share in the free holding and as such they are the freeholders all together in a group.
You also need to find out who the management company is and what the maintenance charges are. Also you will want to know what has been done on the properties in the last two years. One thing that can really ruin a great flat is an awful management company.
craigjm said:
The bit that confuses me in your post is this -
What does a lease typically cost to extend? Apparently the freehold may be for sale soon - again, what would likely cost be? Just looking for very rough estimates.
If the property is leasehold that is different to freehold. Most flats are leasehold and there is a freeholder that issues the leases to the flat owners. Leases are usually for 99 or 125 years from a certain date and they diminish as in your case to 84 years. The leaseholder can apply to have their lease extended back to the original term and the freeholder will issue this on the payment of a charge based on length of years to extend by and other factors.
Then there is the possibility that the property could become "share of freehold" in which as each flat owner buys a share in the free holding and as such they are the freeholders all together in a group.
You also need to find out who the management company is and what the maintenance charges are. Also you will want to know what has been done on the properties in the last two years. One thing that can really ruin a great flat is an awful management company.
Probably as a result of my ignorance of the subject I've likely mixed up terminology. I suspect they're offering 'share of freehold' in future.What does a lease typically cost to extend? Apparently the freehold may be for sale soon - again, what would likely cost be? Just looking for very rough estimates.
If the property is leasehold that is different to freehold. Most flats are leasehold and there is a freeholder that issues the leases to the flat owners. Leases are usually for 99 or 125 years from a certain date and they diminish as in your case to 84 years. The leaseholder can apply to have their lease extended back to the original term and the freeholder will issue this on the payment of a charge based on length of years to extend by and other factors.
Then there is the possibility that the property could become "share of freehold" in which as each flat owner buys a share in the free holding and as such they are the freeholders all together in a group.
You also need to find out who the management company is and what the maintenance charges are. Also you will want to know what has been done on the properties in the last two years. One thing that can really ruin a great flat is an awful management company.
I have spoken to other flat owners in the development who couldn't speak more highly of the management company. They also charge pretty reasonable management fees.
Be vary wary of this one!
We have a rental flat that the other half bought 15 years ago, we tried to sell it last year to fund a house and couldn't sell, well not for anywhere near market value. The flat was basically worthless due to the short lease (58 years in our case) a number of potential buyers struggled to get a mortgage at a decent rate so kept pulling out.
We are currently in the process of extending the lease, the flat is currently worth around 85k, with the lease extended the same flats market for 105k.
The lease is costing us roughly 15k including fees, that gives you an additional 99 years on top of the existing term, we are renting it out now and plan to keep it as a pension top up hence us extending and not just cutting our loses!
As said above, find out what the ground rent costs are, think about how long you plan to keep it for and decide from there, anything below 70 years left and mortgage companies can start to get twitchy.
The longer you let the lease run without extending the more difficult it will be to sell and the more money it will cost to you extend the lease in the future.
The advice above is what we've learned during the process, the other half wasn't advised that when she bought the flat, hence the issues now.
I don't want to sound too negative but it's really caused us a lot of grief so i always warn others!
We have a rental flat that the other half bought 15 years ago, we tried to sell it last year to fund a house and couldn't sell, well not for anywhere near market value. The flat was basically worthless due to the short lease (58 years in our case) a number of potential buyers struggled to get a mortgage at a decent rate so kept pulling out.
We are currently in the process of extending the lease, the flat is currently worth around 85k, with the lease extended the same flats market for 105k.
The lease is costing us roughly 15k including fees, that gives you an additional 99 years on top of the existing term, we are renting it out now and plan to keep it as a pension top up hence us extending and not just cutting our loses!
As said above, find out what the ground rent costs are, think about how long you plan to keep it for and decide from there, anything below 70 years left and mortgage companies can start to get twitchy.
The longer you let the lease run without extending the more difficult it will be to sell and the more money it will cost to you extend the lease in the future.
The advice above is what we've learned during the process, the other half wasn't advised that when she bought the flat, hence the issues now.
I don't want to sound too negative but it's really caused us a lot of grief so i always warn others!
summers said:
Be vary wary of this one!
We have a rental flat that the other half bought 15 years ago, we tried to sell it last year to fund a house and couldn't sell, well not for anywhere near market value. The flat was basically worthless due to the short lease (58 years in our case) a number of potential buyers struggled to get a mortgage at a decent rate so kept pulling out.
We are currently in the process of extending the lease, the flat is currently worth around 85k, with the lease extended the same flats market for 105k.
The lease is costing us roughly 15k including fees, that gives you an additional 99 years on top of the existing term, we are renting it out now and plan to keep it as a pension top up hence us extending and not just cutting our loses!
As said above, find out what the ground rent costs are, think about how long you plan to keep it for and decide from there, anything below 70 years left and mortgage companies can start to get twitchy.
The longer you let the lease run without extending the more difficult it will be to sell and the more money it will cost to you extend the lease in the future.
The advice above is what we've learned during the process, the other half wasn't advised that when she bought the flat, hence the issues now.
I don't want to sound too negative but it's really caused us a lot of grief so i always warn others!
With all due respect a flat with 58 years remaining and one with 84 years remaining are poles apart. A 58 year flat with a full mortgage would leave a residual of 33 years which is why most high street lenders wouldn't touch it. We have a rental flat that the other half bought 15 years ago, we tried to sell it last year to fund a house and couldn't sell, well not for anywhere near market value. The flat was basically worthless due to the short lease (58 years in our case) a number of potential buyers struggled to get a mortgage at a decent rate so kept pulling out.
We are currently in the process of extending the lease, the flat is currently worth around 85k, with the lease extended the same flats market for 105k.
The lease is costing us roughly 15k including fees, that gives you an additional 99 years on top of the existing term, we are renting it out now and plan to keep it as a pension top up hence us extending and not just cutting our loses!
As said above, find out what the ground rent costs are, think about how long you plan to keep it for and decide from there, anything below 70 years left and mortgage companies can start to get twitchy.
The longer you let the lease run without extending the more difficult it will be to sell and the more money it will cost to you extend the lease in the future.
The advice above is what we've learned during the process, the other half wasn't advised that when she bought the flat, hence the issues now.
I don't want to sound too negative but it's really caused us a lot of grief so i always warn others!
High street mortgage companies do not get twitchy below 70 years. I know because I have bought at least 6 properties with less than that, the last one being 68 years and Natwest were fine. The issue for a high street lender is how many years are left once the mortgage has finished and most set this at between 35 and 40 years so its only an issue if you are looking for a full 25 year mortgage on a property with less than 65 years to go.
You also don't have to extend the lease the tell. You can start the process of the lease extension for the new owner because they can't usually do it under their own demand for two years. If you want to sell a flat with a short lease sell it for cash to an investor and take the hit or start the lease extension process.
jdw1234 said:
The important thing is that "marriage value" comes into the cost of extending lease below 80years. I think you have to own in 2 years to extend.
Therefore, make sure you extend it ASAP or it will rapidly become more expensive.
You are right with leases of less than 80 years marriage value comes into play but this need not cost much it all depends on the terms of the lease and the number of years below the 80 years.Therefore, make sure you extend it ASAP or it will rapidly become more expensive.
You do need to own the property for two years to extend but the seller can start the process as part of the sale which means you can extend immediately and the buyer pays not the seller.
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