A large number of people are unsure of the difference between a freehold and a leasehold property, and don’t understand whether it would have an impact on their future when they buy a property. However, buying leasehold can have a negative impact on a house purchase.
Generally, if you buy a freehold property, you will own the property and the land it stands on outright. If you buy a leasehold property, a landlord or a freeholder will own the land. You will only be able to use the home for the number of years specified on the lease.
Although most leases will have an exceptionally long term, like 100 years, occasionally you will find a lease which has just 30 or 40 years remaining. This may cause problems if you intend to remain in the property for many years, or if you intend to sell.
There are some restrictions for leaseholders, like having to apply for permission before undertaking any major work on the property. A leaseholder may have to pay towards the building insurance, annual service charges and maintenance fees, along with a ground rent.
The length of a lease can also effect the value of a property. The longer the lease, the more it is worth. If a house had a lease of 60 years, the value of the house may be worth 10% less.
Before buying a house or flat which is leasehold, talk to a mortgage adviser who has undertaken a CeMAP training course.