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Remortgaging a leasehold involves extra checks and documents. We explain the process, costs and how to avoid delays.
KEY INFORMATION
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.
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.
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.
Get fee-free remortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Your home may be repossessed if you do not keep up repayments on your mortgage. Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
Yes. 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 (10 years if prime location in central London) at the end of the mortgage term and states that:
“Where the remaining leasehold term is less than 85 years, the value of the property will continue to reduce until the lease is extended. This may result in the valuation being less than the purchase price or estimated value. This could also result in the property being declined. In all instances, assessment will be made based on the valuer’s comments.”
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.
There are a few ways to find out how long your lease has left to run:
Potentially. If the lease on your home has less than 80 years remaining, you may want to consider extending it before remortgaging – depending on the cost.
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 and could be years away.
To explore 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.
It may cost more to wait for reforms. Get advice on whether to extend your lease now or wait.
You may be able to remortgage to pay for a lease extension by borrowing more against your property. This will depend on factors including your equity, affordability and the lender’s lease requirements. You need to think carefully before extending borrowing and speak to an expert mortgage broker.
It may even be possible to remortgage and do a lease extension at the same time. For example, Halifax (now part of Lloyds) leasehold lending criteria states: “there must be a minimum of 70 years remaining on the lease at application, or the customer is extending the lease past 70 years as part of the purchase or remortgage application (a special condition will be added to the offer stating the offer is made on the assumption that the lease term is extended on or before completion).”
Speak to the award-winning, fee-free mortgage experts at Mortgage Advice Bureau for more advice.
Once you have your lease and have identified your lease length, you will likely also need a management or leasehold information pack. You can request this from your freeholder. It is a bundle of documents should contain key details about the property, including service charges, buildings insurance, ground rent, planned works and any disputes.
Lenders and solicitors use it to check the financial health of the building and confirm there’s nothing that could affect the property’s value or the lender’s security
If your freeholder doesn’t supply this, then you may need to dig the following out from your own records or go to them to request the following information:
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 between £150 – £500 (though some may cost even more). If a pack is requested, it can take several weeks to arrive.
But, a leasehold management pack isn’t needed in every case. Before requesting or any information from the freeholder and incurring a charge, just double check with your mortgage broker what the lender needs to see.
And finally, if you’re switching to a new product with a lender, there is usually no need for a management pack.
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:
Get fee-free remortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
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.
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.
Get fee-free remortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
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.
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.
Get fee-free remortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Your home may be repossessed if you do not keep up repayments on your mortgage. Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
Yes. Most leasehold remortgages involve flats, and the process is similar to remortgaging other leasehold properties. As part of the remortgage, lenders will check things such as the lease, the service charges and the ground rent.
Yes. But your options may be limited. There is no universal minimum lease length because lenders set their own criteria. Some lenders may not be willing to accept shorter leases. Others prefer at least 85 years remaining, while properties with fewer than 70 years left can be harder to remortgage. If your lease is getting closer to 80 years, it’s worth thinking about extending the lease so as to improve your mortgage options.
Yes, usually. It is the role of a solicitor or conveyancer to handle the legal checks and review the lease. If you stay with the same lender, fewer legal checks may be required.
A leasehold management pack contains key information about your property, including service charges, ground rent, insurance, planned works and disputes. Your solicitor will request this pack from the managing agent or freeholder.
It’s usually the leaseholder who pays for the management pack and ‘notice of charge’ fees. Costs vary depending on the freeholder or management agent, so it’s worth checking charges early in the remortgage process.
Yes, service charge arrears can delay or prevent a remortgage from completing. Lenders will want to know there are no outstanding liabilities, so it’s worth trying to clear any arrears before your new mortgage goes ahead.
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