If you are a flat hunter on a budget you might feel tempted by the prices of very short leasehold properties. If you are the holder of a property with a very short lease, are you feeling worried by the cost of extending the lease? No reason to sweat. 'Why am I considering a short lease property as an investment or home?' you ask yourself. 'Why don't I apply for lease extension?' Here are a few things that might help you find the answer:
Pros:
- buying a short lease property may be cheaper than renting in some prime areas
- significant gains can be made on properties with short leases where the cost in extending a lease is known at the time of purchase as well as the value of the property once the lease extension has been completed.
Cons:
- you must consider the cost of extending a short lease. This can be expensive and the cost to extend the lease is often unknown at the time of purchase the cost of lease extension for a short lease varies widely between properties. This is normally come to by looking at 2 independent surveys provided by both the owner and freeholder.
The good news is that it is a common misconception that properties with short leases are impossible to finance. You may well walk away with that impression after you speak with your bank.
Take heart: some specialist lenders do lend for short leases. Extend if you want to, but think about whether you have to? Policies fall roughly into three categories:
- Ultra short lease mortgages: 3 to 25 years at the beginning of the term- up to 70% loan to value.
Lenders will assess the mortgage based on income. The mortgage is provide on a repayment term basis and this should not be longer than the amount of years remaining on the lease. As long as the lender is sure that the mortgage is repayable, then it should be given
- Short lease mortgages: minimum of 10 years left at the end of the mortgage term - up to 85% loan to value .
Lending is granted again on the principle that as long as the loan is affordable based on income and repaid with a minimum of 10 years remaining at the end, then the lender is happy to consider applications Short lease mortgages: minimum of 25 years left at the end of the mortgage term
- up to 85% loan to value. As you can see you have many options. The best thing to do is to find a specialist lease extension solicitor with real experience in the highly technical area of extending a lease. They will have all the clues and skills to asses you in buying or extending that frightening short lease.