There are two main legal categories of land and property ownership.Freehold
Purchasing a freehold property means that you are the full owner for an unlimited duration. As the freeholder you will have full responsibility for the maintenance and repairs of the property. Subject to law and planning restrictions, you can do what you like to and on your premises.
Leasehold
Purchasing a leasehold property means that you own the property for as long as is specified in the terms of the lease. You are granted the right to live there by the freeholder. At the end of the lease the property becomes the possession of the freeholder once again. In essence you are simply paying for the right to occupy a portion of a building for a given length of time.
Many leases are originally granted for up to 999 years, but existing leases on properties are usually shorter. The majority of leasehold properties are flats or commercial property, although some houses are leasehold.
The lease stipulates who is responsible for maintaining and repairing different parts of the property and any conditions you must meet as a resident. Check these if you are considering buying a leasehold. You must also pay a ground rent to the the freeholder, usually a small amount paid each year. Your solicitor should check that the seller is up to date with ground rent payments before you sign the contract.
You should not buy a property with a lease of less than 60 years, and mortgage lenders are very unlikely to lend for a lease as short as this. Lenders normally want at least 20 years left on the lease after the end of the mortgage term. As a leaseholder you have the right to extend the lease for 90 years or even to buy the freehold if certain criteria are met, though the application process is expensive and takes a long time. Contact the Leasehold Enfranchisement Advisory Service for more information.
11 comments:
Hi Guys,
Ive been on Neils blog for a while now and when checking his today noticed the link to this one so i thought id check it out! Looks good!
One question i have which is not directly related to the post (apologies) is your thoughts on the current property market in UK and the scary media predictions of, for the want of a better term, the arse falling out of it?
I only ask cos i recently bought a flat with my girlfriend as our first step on the ladder and it needed a fair bit of work which is near to completion. We thought this would be the best way to move up the ladder cos we simply couldnt afford to buy the property we wanted in the right area which was the finished article. However, it would be a royal kick in the balls if prices did nosedive and we ended up no further forward!!
What are your thoughts if you dont mind my asking and do you think there is any way to safely navigate the choppy waters of the current property market to not ultimately lose out?
Thanks guys
Craig
Hi Craig,
Firstly thanks for the comment one of our first. Any questions related to property, finance, investment and budgeting are always welcome.
Without knowing the area, value, etc it's difficult to give a detailed opinion. However, there are a number of factors to think about.
The first thing to say is congratulations on making it onto the ladder, that tends to be the hardest part. Furthermore, buying and renovating tends to be the best way to find value in the property market.
The more important issue here is that property is a long term investment. Firstly you need somewhere to live. Over the long term property has ALWAYS been an appreciating asset. True, in the short term the market has highs and lows or "corrections/market adjustments" as the financial press like to call them. In the long run the value rises.
Now the difficulty for many people is:
1) they cannot take the long term view
2) they cannot afford to take the long term view.
The key here is to ensure you can afford your current mortgage payments and have factored in a slight increase in interest rates.
In your particular situation you have added value to the asset but more importantly, you have somewhere to live without paying rent. This will allow you to take your time when it comes to making any decisions about selling and moving up the ladder.
The final point to remember is that if, in the short term, the property tide goes out ALL prices will come down which leaves you no better or worse off.
These are just some general thoughts, for more detailed information or if you have any specific questions,drop us an email of finlowefinance@hotmail.com
Cheers for the response guys, much appreciated. I wasnt terribly worried cos as you say if my place comes down in price, so too will the place i wanna buy so the margins will be roughly the same. I was just a bit concerned that i have the mortage for x amount and then the prices crash and i end up selling for less than i bought for although i doubt there will be that much of a crash!
While im on can i also be cheeky and ask your opinion on land investments? Recently i was tempted to invest in land that is in the stages of planning permission through the UK Land Investments group. Basically, as you will know, they select land that they think wil be able to be used to build on and be valuable and you buy it on that basis so no guarantees but obviously there could be good returns. I was wondering whether you think this type of investment is a good one and if you know anything about this particular organisation?
Thanks again
Craig
Hi Craig,
One thing to remember; even if there is a temporary property crash you can sit pretty and wait till in rebounds as you have somewhere to live!!
Regarding land investment, this is quite a high risk investment as return is so variable. My advise (which is boring but true) is to invest any excess funds into your mortgage, by paying off your morgage earlier you are gauranteed a minimum "return" i.e. the interst saving over 20/30 years. Few people talk about paying off mortgages early but this is one of the soundest and safest ways to generate "return". I know so many people who borrow money to invest in risky projects returning 10% when their borrowing cost are 5/6% the after tax gain is terrible but all you hear is "I made 10% return on investment".
Pay off your mortgage early if you want to gamble head to Vegas!!!!
Remember though I'm a boring accountant you may be far willing to take risks and could make a fortune.
Always remember risk and reward are directly correlated
high potential returns = high risk. Dont invest any money you cant afford to loose.
James
Sounds like good advice to me mate, knowing my luck id invest in a land plot and it wouldnt get planning permission anyway so i think paying hte mortgage could be the best bet
Thanks for the advice guys
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