Author Topic: Will a mortgage lender lend on a lease extension?  (Read 810 times)

Will a mortgage lender lend on a lease extension?
« on: 20 July, 2023, 06:45:31 pm »
I've seen a flat and am quite tempted, except for the 59 years remaining on the lease. As I can't fund the purchase of a lease extension outright, would a mortgage lender fund the purchase? As long as it increases the property's value by the same amount, is my guess, but I'm being optimistic!
Haggerty F, Haggerty R, Tomkins, Noble, Carrick, Robson, Crapper, Dewhurst, Macintyre, Treadmore, Davitt.

robgul

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Re: Will a mortgage lender lend on a lease extension?
« Reply #1 on: 20 July, 2023, 07:03:41 pm »
I've seen a flat and am quite tempted, except for the 59 years remaining on the lease. As I can't fund the purchase of a lease extension outright, would a mortgage lender fund the purchase? As long as it increases the property's value by the same amount, is my guess, but I'm being optimistic!

Unlikely.   

Having a daughter buy a leasehold flat with a lower remaining term than was desirable or mortgageable she got the vendor to sort and pay for the extension of the lease  (there are some statutes and formulae for calculation of the lease extension price . . . can't remember, my (now retired) solicitor brother advised her)

Re: Will a mortgage lender lend on a lease extension?
« Reply #2 on: 20 July, 2023, 07:28:13 pm »
I'm no expert but I did extend my lease some years ago. Many lenders will not consider lending on such a short lease, so you may find it impossible get a mortgage. As an owner you have a statutory right to extend the lease only after owning for two years (although the landlord may choose to consider it earlier) and with a short 59 year lease waiting 2 years will likely increase the cost of the extension dramatically. If the current owner were to buy the lease extension now (in practice taking a few months), it would increase the value of the property and then you could get a mortgage for the higher value.

Re: Will a mortgage lender lend on a lease extension?
« Reply #3 on: 20 July, 2023, 07:37:07 pm »
If one already has a mortgage on the property then the lender probably will extend the loan to cover the extension, so the existing owner could do that.

rogerzilla

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Re: Will a mortgage lender lend on a lease extension?
« Reply #4 on: 20 July, 2023, 09:51:57 pm »
It's cheap to extend a lease if there are > 80 years left, maybe £2,000-3,000.  That's just legal fees and ground rent foregone.   After that it gets expensive as you have to share the increase in value caused by the new, longer, lease with the freeholder.

Leasehold is evil but commonhold isn't much better, which is why hardly any have been set up.  It's difficult to get every owner to cough up for repairs.  You'd have to sue them; they can't be evicted.
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Re: Will a mortgage lender lend on a lease extension?
« Reply #5 on: 20 July, 2023, 09:57:32 pm »
Are there any service charges. We looked at buying a coastal flat, for Air BNB rental, but there were £250 pm service charges, haha, no way .  Maybe they could extend the lease as part of the package, then bump up price a tad , and get mortgage on that figure?

robgul

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Re: Will a mortgage lender lend on a lease extension?
« Reply #6 on: 21 July, 2023, 07:59:23 am »
Are there any service charges. We looked at buying a coastal flat, for Air BNB rental, but there were £250 pm service charges, haha, no way .  Maybe they could extend the lease as part of the package, then bump up price a tad , and get mortgage on that figure?

I was going to mention service charges/ground rent - we have a rental flat where the management charges have more than doubled in less than 5 years (for reference it's First Port that manages the development - they manage '000s of properties) - ground rent has also doubled, although that's fixed for (I think) 10 years.

If you're looking at a Buy to Let then there are other costs associated with tenancy and management be that self or through a letting agent.


Re: Will a mortgage lender lend on a lease extension?
« Reply #7 on: 23 July, 2023, 05:20:28 pm »
Rightio, thanks everyone. The service charges are actually on the low side. Some flats attract ludicrously high charges that can only be lining somebody's pocket.

I'll forget this one, as it sounds rather complicated and dear to get a decent lease length.
Haggerty F, Haggerty R, Tomkins, Noble, Carrick, Robson, Crapper, Dewhurst, Macintyre, Treadmore, Davitt.