Getting a mortgage on a leasehold property

Getting a mortgage on a leasehold property can be more difficult, depending on the length of the lease and what’s in the smallprint – but it varies by lender. We explain how to get a mortgage on a leasehold property, what to watch out for and leasehold reforms afoot.

Angela Kerr Director, Editor

Can I get a mortgage on a leasehold property?

Yes, mortgage lenders do offer mortgages on leasehold properties but there’s criteria you’ll need to meet.

The length of the lease left on the property is the most important factor. Many lenders require at least 85 years left on the lease and most mortgage lenders won’t lend on properties with a lease under 70 years. Some mortgage lenders are more generous when it comes to leasehold properties including NatWest (which requires 30 years to be remaining on the lease at the end of the mortgage term) and Bradford & Bingley (which requires the lease must have 25 years remaining at the end of the term). 

You can find details of each lender’s lease length requirements in industry trade body UK Finance’s Lenders’ Handbook. But if you want to get a mortgage on a leasehold property, instead of doing the hard work of researching yourself, you’ll save time by speaking to an expert fee-free mortgage broker instead.

Criteria for getting a mortgage on a leasehold property

1. Length of lease

Whether or not you can get a mortgage on a leasehold property depends on how long – or short – the lease is. As mentioned above, many lenders require at least 85 years left on the lease and most mortgage lenders won’t lend on properties with a lease under 70 years.

Why does lease length affect whether you can get a mortgage? Because, under the current system, lease extension costs increase significantly once a lease falls below 80 years. After this threshold you’ll need to pay ‘marriage value’ when you extend it – this is half of the amount the property will theoretically increase in value by due to the longer lease. As a result, the value of properties with short leases reduces over time which is why lenders are reluctant to lend on these properties.

However, marriage value is set to be abolished under the Leasehold and Freehold Reform Act 2024 which is now law. But it hasn’t come fully into force yet. Read more about the expected changes and timeline for implementation in our guide on Leasehold reform.

2. Rules on ground rent and service charge

When deciding whether to lend on a leasehold property, lenders will also consider the terms of the lease including about ground rent and service charge, examining any excess charges that would reduce the ability to sell the property.

You can see a full list of lenders’ criteria on ground rent in UK Finance’s Lenders’ Handbook.

• For example, some lenders require the maximum ground rent at the start of the lease term not to exceed 0.1% of the property value.
• Lenders may not lend if the ground rent is reviewed too frequently and have set this at 10 years or less. Nationwide don’t like to see ground rent rises of less than 20 years. This is even the case for ground rents that are reasonable to start with.
• The Lease stipulates regular rent reviews of that ground rent will double over a set period of time.

Ground rents on new properties were banned in 2022. A cap on ground rents on existing leases was not included in the Leasehold and Freehold Reform Act 2024 but action has been promised in the Leasehold and Commonhold Bill.

3. Absent freeholder problems

Buying a leasehold property is fundamentally different to buying a freehold property: with freehold, you own the property and the land it is built on but with leasehold you’ll own the property, not the land, and only for the duration of your lease.

Issues getting a mortgage on a leasehold property can arise if there’s an absent freeholder – this is when a leaseholder is unable to locate their freeholder.

• Most mortgage lenders refuse to lend until the situation has been rectified or indemnity insurance is in place.
• However, not all lenders will lend, even if there’s a policy in place 
• There are other issues to consider before buying a property with an absent freeholder. Read more in our guide on Absent freeholder problems.

Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.

4. EWS1

Any structural issues with the property, such as ongoing cladding issues could require an EWS1 form depending on the property type and the valuation findings as well as lender’s approach.  Any remediation in place that could cost the owner will be factored in as well. Find more information in our guide What is an EWS1 form?

5. Property type

Another factor lenders consider is property type and issues occur for lenders where the property is a high rise flat, an ex-local authority property or in a block without a lift over a certain number of storeys.

Is getting a mortgage on a leasehold property more expensive?

Getting a mortgage on a leasehold property can be more expensive, but it isn’t necessarily. This is because:

• Lenders don’t offer different mortgage rates for leasehold properties so if the property is eligible for a mortgage according to the lender’s criteria you should be able to access the same mortgage rates as you would if you’re buying a freehold property.
• BUT you may face issues accessing the best mortgage rates. Depending on the property you’re buying, you may have a smaller choice of lender. For example, if you’re buying a flat with a short lease or if it’s a high rise flat you may have less choice of mortgage lender. And as a result, you may not be able to access the best mortgage rates.

Get advice from our fee free mortgage brokers as they know which lenders are more leasehold friendly

Are there extra costs of buying a leasehold property?

Extra costs when buying a leasehold property include:

• Higher leasehold conveyancing costs: You’re likely to pay higher conveyancing costs when you buy a leasehold property as there is more legal work involved with the sale, this varies but could add around £300. Find out more with our guide to leasehold conveyancing.
• Additional costs once you’ve moved in: When you buy a leasehold property, you may need to pay higher ongoing costs such as ground rent and service charges. Read more in our guide on Leasehold charges.

Can I extend my lease?

Yes, you can extend your lease although it can be a long and expensive process. The Leasehold and Freehold Reform Act aims to make it easier and cheaper (for some) to extend their lease. But as we explain above, this leasehold reform hasn’t fully come into effect yet.

If you are a leaseholder considering whether to extend your lease now or to wait, you should seek advice from a leasehold specialist. You can get a free initial consultation and estimate from our leasehold specialist partners. Our advice guide will give you a general idea of what leasehold extension costs to be aware of.

Can I buy the freehold?

You can buy the freehold, but it can be difficult. Buying the freehold isn’t something you can do on your own – you have to get your neighbours involved too. See our guide: should I buy the freehold for more advice.

The Leasehold and Freehold Reform Act also aims to make it easier and cheaper for some to buy their freehold. So if you’re considering whether to buy the freehold now or wait, you should seek advice from a leasehold specialist.

Is a leasehold property a good idea?

The reality is that if you’re buying a flat in the UK, then it’s likely to be leasehold. So you really might not have an option. All you can do is make sure you are entering into the purchase with your eyes open.

• Most importantly, check with the estate agent and vendor up front how long the lease is as this will impact on what mortgage you can get. It may be a comparable property that is freehold is much simpler to buy and less expensive overall. Read our guide on Buying a Leasehold property
• Find out about any service charges, ground rent and planned works to communal areas. Here is what you should look for in terms of leasehold charges.