Mortgages on Flats with a Freehold Involvement
ARTICLES AND FAQS
Some of the things people ask and problems they have, with our comments and answers.
We don't arrange mortgages, but do find that a lot of people have trouble getting a mortgage on a shared freehold flat or in other situations where a freehold is involved. This is because either the people they are dealing with don't understand concepts such as "shared freehold" or because the applicant says the flat is "freehold".
There is a page that explains why a "pure" freehold flat is virtually unmortgageable. There are other situations involving "freehold" which can be acceptable. See Freehold subject to Leases" and Crossover Leases pages.
The mortgage will be on the lease of the individual flat. The other people who share the freehold will certainly not want your mortgage on their shared ownership of the freehold of the building!
The simplest thing to do is just tell the lender/broker that you are buying a flat. They will then usually assume that it is leasehold and the application can proceed hopefully without problems.
If you instruct Richard Webster & Co to act for you, tell us all you know about the leasehold/freehold situation when you first contact us - we can usually work out what is happening by asking a few questions.
Some lenders are fussy about these details, mainly less well known lenders, but HSBC/First Direct do not subscribe to the standard "book of rules" about these things - the Council of Mortgage Lenders Handbook (see its paragraph 5.7), which means their reaction is unpredictable.
The length of the lease will still be relevant. Lenders have criteria about how long a lease they will accept, generally between 55 and 75 years, depending on the lender and often on the length of the mortgage being taken.
If you are buying a share in the freehold this doesn't automatically extend the length of the lease. Usually this can be done without paying several thousand pounds for an extension as is common where there is an outside landlord. However if the lease is too short for your lender your seller will still have to organise an extension in order to sell the flat.
If the lease is long enough for your lender, it is still worthwhile checking that an extension can be obtained at no more than the legal costs of drawing up the documents. Sometimes the other shared freeholders have longer leases, and will not have to have their leases extended, and so want a sum of money to extend the one you are buying!
Copyright: Richard Webster & Co 2010
Richard Webster & Co 30 Leigh Road Eastleigh Hampshire SO50 9DT
Issues about Mortgages on Shared Freehold Flats
Page Last Revised 16/02/11