Remortgaging a leasehold

Thousands of leasehold properties are remortgaged every day, and the process is broadly similar to the standard remortgage process. However, as you’re a leaseholder, lenders will want to carry out additional checks, compared with freehold properties, and this can cause delays. Here's your checklist for remortgaging a leasehold.

Can you remortgage a leasehold property?

Yes. Remortgaging a leasehold property can be slightly more complicated than remortgaging a freehold home because lenders need to assess factors such as the remaining lease length, ground rent, service charges, and the building’s management arrangements. That said, thousands of leaseholders switch mortgage each year without difficulty.

What if I don’t choose to remortgage my leasehold?

We know it sounds like a chore, but not remortgaging your leasehold in time, when your current mortgage deal ends (usually 2,3 or 5 years after you first took out your mortgage), then your lender will simply roll you onto their standard variable rate (SVR) mortgage. These are significantly more expensive, and could cost you hundreds of pounds more every month because they charge higher interest rates than the best available deals on the market.

Different types of remortgaging

Before you embark on the leasehold remortgage process, it’s important to understand the different types of remortgage available. The option you choose can affect the legal work involved, how long the process takes, and the costs you’ll pay.

• Switching to a new lender – with this option, you move to a different lender, often to secure a better interest rate or more suitable mortgage deal. This usually involves affordability checks, legal checks and conveyancing
• Taking a product transfer with the existing lender – this involves you switching to a new mortgage deal with your current lenders. As you’re not changing lenders, the process is often quicker and doesn’t usually require any conveyancing. Generally, there are no affordability or credit checks when you do a standard product transfer to a new rate with your current lender if you are not changing the loan size, term length, or repayment method.
• Remortgaging to borrow more – with this type of remortgage, you increase the amount you’re borrowing, perhaps to fund home improvements, consolidate debts, or to cover the cost of extending your lease (more below). Your lender will assess whether you can afford the additional borrowing, and whether you have enough equity in your property

Deciding the best remortgage route depends on your personal circumstances. The award-winning expert advisers at Mortgage Advice Bureau will discuss your options and find the right remortgage for you.

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Why does it matter how long my lease is?

While the rules vary from one lender to the next, many prefer leasehold properties to have at least 85 years remaining on the lease at the time of the remortgage.

Mortgage options can dwindle as your lease approaches 80 years, and many lenders are likely to be reluctant to lend on properties with fewer than 70 years left.

Some lenders may even specify the number of years that must remain at the end of the mortgage term – you need to check carefully. For example NatWest requires 30 years to be remaining on the lease at the end of the mortgage term while at Bradford & Bingley it is 25 years.

A short lease can also reduce your property’s value because it may be less attractive to buyers who may be thinking about the cost of extending the lease. This could potentially make you leasehold home harder to sell, or to remortgage.

How do I check how many years remain on the lease?

There are a few ways to find out how long your lease has left to run:

• Check your lease – the first few pages of your paperwork should state the start date and the original term, allowing you to work out how many years remain
• Ask your freeholder, managing agent or solicitor who handled the purchase – if you don’t have a copy of the lease, one of these individuals may be able to confirm the remaining lease term
• Get a copy from the Land Registry – you can download the title register from here; you can even download the lease itself, if needed, though there will usually be a fee to do this
• You can also use the lease-checker tool from LEASE

Can I extend my lease if it’s not got long to run?

Yes. If the lease on your home has less than 80 years remaining, you may want to consider extending it before remortgaging – and this is certainly possible.

Doing so may improve your mortgage options; it could also boost your property’s value.

While recent leasehold reforms aim to make lease extensions easier and cheaper, many changes have not taken effect as yet.

If you are wondering whether to extend your lease,  when to extend your lease and how much a lease extension might cost – you can speak to our partner expert lease solicitors for a free consultation and quote.

Is your lease running low?

It may cost more to wait for reforms. Get advice on whether to extend your lease now or wait.

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Find your latest service charge and ground rent information

Once you have identified your lease length, before you remortgage a leasehold property, it’s also important to have to hand:

• Your latest service charge statement
• Proof your payments are up to date
• Details of your ground rent – including a recent payment receipt
• Information about major works – details of any planned works, Section 20 consultation notices, as well as any ‘sinking fund’ to cover your contribution to future planned improvements to the building and communal areas
• Details of any disputes – information about any ongoing disputes with the freeholder or managing agent, or any tribunal proceedings

You can usually download these documents from your managing agent’s online portal. Alternatively, you can request them from your managing agent, freeholder, housing association or council.

What concerns might lenders have about service charges or ground rent?

When you start your leasehold remortgage, your lender will look at your ongoing costs, as well as the property itself – and they may have concerns. For example:

• Very high or rapidly-increasing service charges – costly or rising service charges can affect how much you can afford to borrow. They may also be an indication that expensive maintenance or major works are planned
• Service charge arrears – unpaid service charges or ground rent could delay your remortgage until these payments are settled, as lenders will want to be confident there are no outstanding liabilities linked to the property
• Restrictive ground rent clauses – some lenders may be cautious about leases with ground rents which increase sharply, or even as much as double, at regular intervals. These terms can make the property harder to sell or remortgage in the future

If you’re unsure about any of these things, speak to a fee free expert mortgage broker at Mortgage Advice Bureau about whether they could affect your application, explore your options and may be able to recommend specialist lenders.

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What other leasehold documents will I need?

In addition to the lease, there are a host of other documents you may need to gather together ahead of your leasehold remortgage. These include:

• Buildings insurance policy
• A management or leasehold information pack – this contains key details about the property, including service charges, planned works and any disputes
• Contact details for the managing agent or freeholder
• Evidence of any consents required by the lease – such as permissions for alterations or other changes required under the terms of your lease
• EWS1 – some lenders may request additional building safety information relating to structural issues, such as cladding, via an EWS1 form
• Details of major works, disputes or breaches of the lease – these could affect the lender’s decision or potentially delay the remortgage process

Be aware that getting hold of the management pack can be one of the biggest causes of delay in a leasehold remortgage and comes with a cost of £50-£350, so you may want to check with the lender they definitely need it before requesting it. Your mortgage broker will be able to guide you on this.

The leasehold remortgage process

1. Check your current mortgage deal – find out when your existing deal is due to end
2. Check the length of your lease, and also the terms – you need to find out how many years remain, and check for any issues that could affect your remortgage, such as high ground rent
3. Compare the best remortgage deals for you. You can get an idea from our Compare Mortgage Rates tool. But the easiest way to do this is to speak to a mortgage broker. You can get fee-free mortgage advice from the experts at Mortgage Advice Bureau. Brokers can be especially helpful if your lease is short, or if there are complications.
4. Decide whether to stay with your current lender or switch. Your broker can find you the best deals available for your circumstances with your current lender and by looking at other lenders. They can help you explore staying with the existing lender (known as a product transfer) vs switching to a new lender. Staying with your current lender is usually quicker and involves less paperwork, however, you may miss out on cheaper rates available at different lenders.
5. Check remortgage costs. If you’re switching lenders, you’ll need a conveyancer to handle the legal work and the lender will usually require a mortgage valuation too. In many cases, legal fees and valuations are included in the remortgage deal. But you don’t need to do the calculations yourself. An expert adviser will crunch the numbers for you to find the best mortgage for you.
6. Start your application – this will be faster if you use a broker. Once you have agreed with your broker the best mortgage deal for you, they can organise and oversee the application. This will involve you providing details about your income and finances and information about your leasehold property
7. Instruct a solicitor or conveyancer – if required, the solicitor will handle all the legal work involved in the leasehold remortgage. This includes checking the lease, title documents and any lender requirements
8. Gather leasehold information – this involves you tracking down documents such as your lease, details of the service charge, ground rent information. It is then your solicitor’s job to check the title, lease, insurance and lender requirements, and to look for issues such as outstanding charges, planned major works, disputes, or missing information
9. Sign the paperwork – once everything has been approved, it’s over to you to sign the mortgage documents. Your new mortgage is now up and running and will replace the old one
10. Get the remortgage finalised

How long does it take to remortgage a leasehold?

When you remortgage a leasehold property, timescales can vary, depending on your lender, solicitor and managing agent.

As a guide, a leasehold remortgage could take around six to 12 weeks, but this is not guaranteed, as delays are common.

Common delays when remortgaging a leasehold property

Even though leasehold remortgages follow a similar process to other remortgages, they can take longer due to extra checks – and the additional documents which are often required.

Here are some of the common causes of delay and how to mitigate them:

• Slow management pack responses – waiting for the freeholder or managing agent to provide the management pack can hold up the legal checks. Ask your conveyancer to request it as early as possible
• A short lease – if your lease doesn’t have many years left, the lender may require further checks, or you may need to extend the lease before being able to proceed with the remortgage. Consider extending your lease, or speak to a mortgage broker about your options
• Service charge arrears or ground rent arrears – outstanding payments may need to be cleared before the remortgage can go through. Pay off any arrears and keep proof of payment
• Ground rent clauses the lender isn’t happy with – some lenders may raise concerns about leases with high ground rent, or leases where the ground rent increases at a very fast rate. Ask your solicitor to review the lease before you apply.
• Major works or building safety issues – planned works, large future bills, or building safety concerns (such as cladding), may require further information before the lender can proceed. Request details from your managing agent before applying.
• Missing buildings insurance information – your solicitor may need proof that there is sufficient buildings insurance in place before the lender can approve the mortgage. Get hold of the policy details from your managing agent or freeholder
• Freeholder consent, or a deed of variation, is required – some leases need additional documents or approvals before the remortgage can go ahead. Speak to your solicitor as soon as possible to avoid delays

When should I start the remortgaging process for a leasehold property?

It’s sensible to start looking at your remortgage options up to six months before your current deal ends.

Starting early gives you more time to compare mortgage deals, gather the necessary documents – and to deal with any issues that could delay your application.

How much does a leasehold remortgage cost?

There are several costs you need to consider when remortgaging a leasehold property. The key thing to remember is that alongside the usual remortgage fees, you may have to pay charges that are specific to being a leaseholder, such as managing pack or notice fees.

It’s important to understand the costs before you apply, and to factor these into your budgeting.

‘Standard’ remortgage fees:

Depending on your mortgage deal, you may need to pay some or all of the following:

Early repayment charge (ERC) – this is paid if you leave your current mortgage deal before it ends; an ERC is typically between 1% and 5% of the outstanding mortgage balance

Exit fee – an admin charge for closing your existing mortgage; usually up to £300, though some lenders won’t charge it

Arrangement fee – charged by your new lender to set up the mortgage; can range from £0 to £2,000, or more

Booking fee – some lenders charge an upfront application fee; can be around £500

Mortgage valuation fee – this covers the lender’s valuation of your property; some lenders include this for free; if not, expect to pay around £400

Conveyancing fee – this pays for the legal work involved in the remortgage; many lenders offer free legal services; if not, this could cost around £300. Word of warning: while you may like the sound of ‘free valuation of legal work’ it’s always important to compare the total cost, and to check whether the legal service offered can handle leasehold complications.

Mortgage broker fee – some brokers don’t charge a fee, but others do; this could be up to 1% of the mortgage value. HomeOwners Alliance readers get fee-free remortgage advice from our award-winning mortgage experts at Mortgage Advice Bureau. They can compare deals and check which lenders may accept your leasehold property.

Need remortgage advice?

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Additional leasehold remortgage costs to be aware of:

• Management pack fee – charged by the freeholder or management agent
• Notice of charge fee – a fee for registering your new mortgage with the freeholder or managing agent
• Deed of variation costs (if needed) – if your lease includes terms that your lender won’t accept, it may need to be amended; this may be at your expense
• Lease extension costs – you will face this cost if you need to extend your lease before remortgaging; the lease extension premium could be between £6,000 and £8,000 (plus there are additional costs to factor in, too)

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