Can our children take out a mortgage to fund the lease extension on our property?
Q: We are in our 70s and have only 40 years on our lease . The cost of a lease extension would be prohibitive and lenders are unlikely to give anyone a mortgage to buy it. Is there any possible solution other than our children renting it out after our death until the lease is over?
Lenders will have varying criteria on the minimum length that they require on a lease. That can typically be at least 70 years although others may impose a minimum of 55 years as long as at least 30 years will be remaining at the end of the mortgage term.
A short lease will therefore hinder the mortgage options and as a result is likely to put off some prospective buyers. Those that do continue to show an interest are bound to want the purchase price to reflect the cost of extending the lease.
The shorter the lease the more expensive it will be to extend although that is always your right and if you feel that the valuation is not correct it is possible to contest that. There is lots of good information for leaseholders to be found on the Leasehold Advisory Service.
In terms of family securing a mortgage on the property now, the first issue will be that the property is not in their name. If the property has passed to them then it may be possible for them to raise funds against it contingent on a lease extension. The solicitor may then be able to extend the lease, immediately before the completion of the mortgage but this would need to be checked out with the lender in advance.
That might be possible for the owners but of course options would be further limited by the maximum age of 75 that many lenders impose as well as the need to meet affordability criteria.
David Hollingworth, London & Country Mortgages