When buying a property should you opt for a freehold or leasehold home? There are pros and cons to both. It just depends on your particular circumstances at the time and whether you would feel better being the outright owner of your home or not.
For instance, if you buy a freehold property you will own your home outright whereas in the case of a freehold property, you own the building but not the land on which it sits. Having said that, the lease on many leasehold properties run to 90 to 100 years and more these days. We’ve even heard of some leases running to 999 years!
You’ll find that a leasehold property in the UK is very often an apartment dwelling rather than a detached or semi-detached home. When you purchase a leasehold property you retain the rights for the property and the land on which it sits for the particular period stipulated in the lease.
So why lease rather than buy outright (pros)
- A leasehold property is less expensive – which is good news considering today’s property prices.
- With respect to the last point it means you can live in a lovely part of a city at a relatively nominal cost.
- The landlord (ie property owner) is responsible for the general maintenance of the property).
- The property will probably gain in value over the years and you’ll be able to buy the property at the agreed lease option price.
- Although you’re a leaseholder you’re still free to build an extension or make any other improvements since you own the property (albeit not the land). You’ll have to ask for the landlord’s permission first though.
Why choose a freehold property?
- The property is entirely yours so if you ever need to work away for six months or find yourself in financial straits and move back home for a bit then you can always legally rent it out (this may prove a problem with a leasehold property)
- You are paying the maintenance charges so you know they’ll always get done.
- It’s easier to get a mortgage for a freehold property – especially if a leasehold property has a short lease (less than 70 years)
- With a leasehold property the land rent may increase over time – particularly if the area in which your property is in experiences a financial boom. This isn’t the case with a freehold investment.
There is a ‘third way’ and that is to buy a share in a block of flats via a Share of Freehold. Because all the shareholders own their property it’s possible to set up a private company (association) which can handle the maintenance of communal areas, as well as the insurance. This means more of a say in how the building is looked after.
Again, whether a freehold or lease is better depends on what you’re looking for at a particular time. Certainly, a leasehold property is a good – and less expensive – way to get on the property ladder.
For more advice and help regards marketing a property then do get in touch with us here at theblueplan.com. We’d be happy to help!