mortgage query

[Epona]

Don't get a leasehold flat - it may seem like a good option, but being hit with an 18k bill for roof/pointing and other works (that had to be paid within 2 years, basically the fuckers wanted 9k a year or a court order would have been sought to take ownership of my flat for non-payment - which is fucking outrageous - yeah we found the money but it was basically through begging from family and other stuff that I would rather not talk about - our freeholder is Newham Council, not some slum landlord btw).

Please please look for somewhere freehold, set up a bank account or jar to pay a bit into every month as a fund to cover repairs and maintenance. But being in control of getting people to come round and fix stuff yourself, prioritising what to fix, rather than being hit with a massively life-changing bill all at once is a real blessing, seriously.

Leasehold flats can be an utter nightmare, and I've been on the verge of some sort of mental break due to stress a couple of times.

You're better off renting than having a mortgage and getting charged by the freeholder for major works.

Don't do it.

 

[sheothebudworths]

Admittedly rare, freehold flat are out there. They are unmortgagable and very inadvisable.

2 bedroom freehold maisonette reduced for quick sale | in Coventry, West Midlands | Gumtree

What makes you say that?

There are actually lots of flat conversions around here, with a share of the freehold - and I mean houses split into two flats. As far as I know, they're not unmortgageable - they're just more expensive than leasehold (for what seems to me to be self-explanatory reasons).

 

[mauvais]

What makes you say that?

There are actually lots of flat conversions around here, with a share of the freehold - and I mean houses split into two flats. As far as I know, they're not unmortgageable - they're just more expensive than leasehold (for what seems to me to be self-explanatory reasons).

Freeholds in what would normally be leasehold circumstances (e.g. an apartment block) can be difficult to mortgage because it's unclear who has responsibility for sorting out any problems with the shared fabric, and even if it is defined, getting all parties to actually sort it is hard. With a leasehold they are compelled to do so, often by a management company.

Also freehold isn't necessarily worth anything monetarily significant. Our vendor (of a house) bought the freehold for about £300 to simplify matters, instead of paying £10 a year.

 

[hash tag]

You can of course live in a leasehold flat and own a share of the freehold. A freehold flat I would not touch. I would question the ability to even get a mortgage on a freehold flat, even a very tiny mortgage for the reason mauvais says. An issue with the foundations, roof or drains could render a freehold flat worthless.

 

[sheothebudworths]

Freeholds in what would normally be leasehold circumstances (e.g. an apartment block) can be difficult to mortgage because it's unclear who has responsibility for sorting out any problems with the shared fabric, and even if it is defined, getting all parties to actually sort it is hard. With a leasehold they are compelled to do so, often by a management company.

Also freehold isn't necessarily worth anything monetarily significant. Our vendor (of a house) bought the freehold for about £300 to simplify matters, instead of paying £10 a year.

But a shared freehold in one flat, in a house conversion of two, is worth significantly more, isn't it? Ftr, I'm not looking at any blocks although some of them are for eg two storey blocks of four flats, or two storey blocks of maybe five terraced houses, some split into two flats (but some of those being ex-LA/the freeholder still being the council).

Our situation is also so complicated that I almost have nothing to lose by trying but we are right at the bottom in terms of budget (I'm only looking for two bed places to house the three of us) but where that actually potentially gives us lots more security than rentals will (I will 100% be priced out of Brighton eventually, let alone being able to provide continued housing to either of my children).

I can't save anything more by continuing to rent and from Tuesday I will be eating into the high LTV thingy we have now by £350 a month, so where that'll reduce our mortgage offer etc. I can't stretch our income any more than I already have either. If we take the maximum mortgage offered, we'll be saving £300 a month on what we're managing now. I'm aware that that's fuck all if anything goes wrong but I can't see any better way now than giving it a go either.

If we move to a different rental place, we'll lose a further £100 a month, minimum (plus letting fees and removal costs), as well as tying ourselves into a new 12 month rental contract, where we may very well not have the mortgage offer at the end of that. Like I said, it's complicated

 

[sheothebudworths]

You can of course live in a leasehold flat and own a share of the freehold. A freehold flat I would not touch. I would question the ability to even get a mortgage on a freehold flat, even a very tiny mortgage for the reason mauvais says. An issue with the foundations, roof or drains could render a freehold flat worthless.

Oh god - can you expand on this - I have no idea what it means!

Here is literally the only example I can give you - a ground floor, shared-freehold flat, with a garden, in a Victorian terrace split into two flats.
I don't understand why any of the other possible issues you've put forward there might be less costly in a leasehold property (and presumably those issues would be highlighted in a survey)?

 

[hash tag]

In a word, no. A freehold flat is virtually worthless. A flat with a short lease (less than 80 years) would be worth considerably less than a place with a much longer lease And I doubt that having a lease and owning a share of the freehold would add anything in value to a property. If it's ex local authority, it will certainly be a leasehold place.
i am guessing it's pretty much the same be it a 2 flat conversion or a 50 flat purpose built place. Having a long lease is everything. Condition of property will make a difference as will height of property. Over 5 floors it must have a lift.

 

[hash tag]

I would put money on you sheothebudworths having a lease and owning a share of the freehold.
the freehold merely refers to owning a share of the land on/in which the property stands.
Owning a share of the freehold will make little difference to you. It's having a lease and a long one which is literally a deal breaker.
i wouldn't get too hung up about owning a share of the freehold if I were you.
some of my neighbours own a share of the freehold. I was not given that option and nor can I get the option, but hey, no problem.

 

[Puddy_Tat]

from the perspective of a current leaseholder who's starting to give serious thought to moving - i've no professional involvement in this and i'm nothing remotely resembling a lawyer...

Home - The Leasehold Advisory Service has more on the joys and otherwise of leasehold (on the basis we're talking about a place in england. i'm aware it's definitely different in scotland, and there may be subtle differences in wales and n ireland.)

a place with a short lease (less than 80 years) is going to be more difficult to raise a mortgage on. you can get a lease extended, but you have to pay to - and there's probably legal fees involved.

yes, an ex local authority flat will almost certainly be leasehold - houses are generally (but not always) freehold. in general, local authority freeholders don't take the piss as much as private property management companies, but it's not guaranteed. and there's the risk you'll get a poor offer if the council decide to 'regenerate' the estate (i.e. knock it down, move the plebs out and flog it cheap to a property developer)

the bigger the block, the bigger potential cost for maintenance / refurbishment (think huge amounts of scaffolding to do anything much, lifts to maintain / replace, communal heating systems and so on) - some mortgage lenders won't touch ex council blocks - especially high rises.

share of freehold means that the individual flat 'owners' are still leaseholders, but the freeholder is a management company in which each of the flat 'owners' has a share. so in theory you haven't got an external management company taking excessive profits out of it.

i have seen flats advertised on the basis that you're buying (say) the downstairs flat, but you're also the freeholder of the upstairs flat which is 'owned' on leasehold by someone else. i'm not sure i'd want to touch that with a barge pole.

generally speaking, if you're in a leasehold place, you'll be paying an annual management / maintenance charge, ground rent, and buildings insurance will be compulsory and through the freeholder.

i'm a leaseholder in an ex council 2 bed flat and i pay 90 quid a year ground rent / management charge (in practice it means they send me a bill once a year and cut the grass badly now and then) and buildings insurance is in the region of 350 a year. it went up with a thump last year and i suspect it will go up again next time round what with the aftermath of grenfell tower. the block is only 4 flats so it doesn't take a lot of maintenance and doesn't have lifts and so on to go wrong.

i have seen privately managed leasehold flats with maintenance / management charge of 100 quid a month or more. in theory leaseholders can challenge it if the freeholders are blatantly taking the piss but i suspect it's complicated.

i've never met the concept of a 'freehold flat' (as opposed to 'share of freehold') - and yes i can see potential difficulties if each flat is a completely separate legal unit and there's no legal entity responsible for the overall structure. you can also occasionally get 'defective leases' and 'absentee freeholders' which also sound like they are best avoided unless you really know what you're doing.

oh, and legal costs for buying a leasehold place may be more, as the lawyer will need to go through the lease and check it for nasties.

 

[sheothebudworths]

Sorry, I'm getting really confused now - and probably being very confusing myself.

I'm talking about different properties.

Can we start from the beginning? Do you mean that where a flat is advertised as having a share of the freehold (with NO MENTION of it being leasehold), in a house, split into two it does NOT follow that that's basically the same as it being freehold *split into two*? (I do understand why that in itself could be bad, tbf, but all the same that's my understanding of it - I'm on a steep learning curve here).

I do understand that that means you're really responsible for what happens to BOTH flats but, if I take that on, with a full survey, why is that much worse than taking on any single freehold house (?) as opposed to leasehold in a *group* of properties? I do get that there are more people to share the cost, too but is there really no advantage to having any sway over what happens and when?

Ftr, none of the *leasehold* properties we can afford have very long leases either. I'm ignoring the 'short lease' properties - and I have been told not to look for under 80 years, as you say - but none of them come in much over that either.

 

[mauvais]

Oh god - can you expand on this - I have no idea what it means!

Here is literally the only example I can give you - a ground floor, shared-freehold flat, with a garden, in a Victorian terrace split into two flats.
I don't understand why any of the other possible issues you've put forward there might be less costly in a leasehold property (and presumably those issues would be highlighted in a survey)?

I agree with hash tag that you're probably actually talking about a lease, but flats aren't my cup of tea so I'm not certain.

In answer to your question, it's not about cost per se, it's about risk. A lender wants simplicity - long story short, that if you go bust, they can sell the thing for at least the debt outstanding. If for example the roof is falling in but no easy settlement can be made as to who pays for it, they can't sell it, and so if they perceive that risk, won't lend. Also, no lender = no buyer = unsustainable asking price. At the end of the day the roof is falling in regardless and someone eventually has to cough up, so the costs are no different, but the market value is affected.

More generally, in terms of buying, don't overlook the costs. You need to pay a solicitor, get a survey and possibly pay a mortgage application fee - however you can potentially roll all of these into the loan. Before you can complete, you also need buildings insurance in place. If you've ever owned property before, you'll have to pay stamp duty.

However buying somewhere is good idea not just because of cash flow, but because the actual cost of your mortgage - the interest component - is tiny compared to rent. Maybe 20%.

Can I ask what you've done about mortgages? Have you gone straight to a lender or are you using a broker? Have you got an 'agreement in principle'?

 

[hash tag]

Adding to @Puddy_Tats wise words, if you are buying a place with a lease of less than 80 years, you will have to extend the lease before you can complete. My outstanding lease is currently 81 years. It's costing me a lot to extend the lease, but about 20% of what it would cost me to extend it if it currently stood at 70 years (approximately).
it is not cheap to extend a lease and the cost of extending it will vary according to value of property and how much you can negotiate the price down to.

 

[sheothebudworths]

from the perspective of a current leaseholder who's starting to give serious thought to moving - i've no professional involvement in this and i'm nothing remotely resembling a lawyer...

Home - The Leasehold Advisory Service has more on the joys and otherwise of leasehold (on the basis we're talking about a place in england. i'm aware it's definitely different in scotland, and there may be subtle differences in wales and n ireland.)

a place with a short lease (less than 80 years) is going to be more difficult to raise a mortgage on. you can get a lease extended, but you have to pay to - and there's probably legal fees involved.

yes, an ex local authority flat will almost certainly be leasehold - houses are generally (but not always) freehold. in general, local authority freeholders don't take the piss as much as private property management companies, but it's not guaranteed. and there's the risk you'll get a poor offer if the council decide to 'regenerate' the estate (i.e. knock it down, move the plebs out and flog it cheap to a property developer)

the bigger the block, the bigger potential cost for maintenance / refurbishment (think huge amounts of scaffolding to do anything much, lifts to maintain / replace, communal heating systems and so on) - some mortgage lenders won't touch ex council blocks - especially high rises.

share of freehold means that the individual flat 'owners' are still leaseholders, but the freeholder is a management company in which each of the flat 'owners' has a share. so in theory you haven't got an external management company taking excessive profits out of it.

i have seen flats advertised on the basis that you're buying (say) the downstairs flat, but you're also the freeholder of the upstairs flat which is 'owned' on leasehold by someone else. i'm not sure i'd want to touch that with a barge pole.

generally speaking, if you're in a leasehold place, you'll be paying an annual management / maintenance charge, ground rent, and buildings insurance will be compulsory and through the freeholder.

i'm a leaseholder in an ex council 2 bed flat and i pay 90 quid a year ground rent / management charge (in practice it means they send me a bill once a year and cut the grass badly now and then) and buildings insurance is in the region of 350 a year. it went up with a thump last year and i suspect it will go up again next time round what with the aftermath of grenfell tower. the block is only 4 flats so it doesn't take a lot of maintenance and doesn't have lifts and so on to go wrong.

i have seen privately managed leasehold flats with maintenance / management charge of 100 quid a month or more. in theory leaseholders can challenge it if the freeholders are blatantly taking the piss but i suspect it's complicated.

i've never met the concept of a 'freehold flat' (as opposed to 'share of freehold') - and yes i can see potential difficulties if each flat is a completely separate legal unit and there's no legal entity responsible for the overall structure. you can also occasionally get 'defective leases' and 'absentee freeholders' which also sound like they are best avoided unless you really know what you're doing.

oh, and legal costs for buying a leasehold place may be more, as the lawyer will need to go through the lease and check it for nasties.

Thank you for that!

Could you tell me any more about the downsides of shared freehold - but using the example of a Victorian terrace, split into two flats. It's on at over what I have but it's closer to us and I just prefer it so had thought it was worth making an offer but I've clearly not quite got to grips with the 'share of freehold' business, specifically (I did just imagine that meant it was literally shared between the two flats ).

 

[hash tag]

Oh sheothebudworths a 50/50 split of the freehold is a share of the freehold. The proportion of the freehold you own is really not important.
check and recheck the selling details, I'm sure that somewhere it will confirm there will be a lease and how long, if it doesn't state this ask. If it doesn't have a lease, walk away. If it has a short lease ask if the seller is going to extend it, if not, ask how much it will cost to extend it. This is that important it's a deal breaker.
normally, the only people who buy a place with a short lease are the super rich, who are probably buying in central London and can afford for the place to be literally worthless in a matter of just a few years.

 

[mauvais]

As a safety net, solicitors should advise on all this anyway. However of course you will have had to instruct one by then.

 

[Puddy_Tat]

Could you tell me any more about the downsides of shared freehold

found this article that may help.

I did just imagine that meant it was literally shared between the two flats ).

it may well be if there's just 2 flats in the building.

effectively, you'd still be a leaseholder as far as your flat is concerned, but the freeholder would be an entity that you own a 50% stake in.

 

[sheothebudworths]

I agree with hash tag that you're probably actually talking about a lease, but flats aren't my cup of tea so I'm not certain.

In answer to your question, it's not about cost per se, it's about risk. A lender wants simplicity - long story short, that if you go bust, they can sell the thing for at least the debt outstanding. If for example the roof is falling in but no easy settlement can be made as to who pays for it, they can't sell it, and so if they perceive that risk, won't lend. Also, no lender = no buyer = unsustainable asking price. At the end of the day the roof is falling in regardless and someone eventually has to cough up, so the costs are no different, but the market value is affected.

More generally, in terms of buying, don't overlook the costs. You need to pay a solicitor, get a survey and possibly pay a mortgage application fee - however you can potentially roll all of these into the loan. Before you can complete, you also need buildings insurance in place. If you've ever owned property before, you'll have to pay stamp duty.

However buying somewhere is good idea not just because of cash flow, but because the actual cost of your mortgage - the interest component - is tiny compared to rent. Maybe 20%.

Can I ask what you've done about mortgages? Have you gone straight to a lender or are you using a broker? Have you got an 'agreement in principle'?

I can promise you I am shit hot at working out budgets, at investigating every possibility, at re-investigating it when it doesn't work the first time.

I'm a single parent, of a single parent, so it's just the way I roll

I have TOTALLY budgeted for every possible expense, prior to moving - and I literally can't afford NOT to move into somewhere that's a bit shit, in one way or another.
In actual fact, I should probably take a bit MORE risk and it's entirely down to my usual, cautious budgeting that I'm finding that bit difficult... *(how much you can borrow) + (how much you have) - (every possible cost going and then a slightly ridiculous amount over and then some more).

I have sought advice from a broker, an independent financial advisor and my own bank but, as ever, I get the best results from doing it myself.
That IS because I need a lender who will allow some/all of my tax credits/child benefit AND who will take on my son's wage as an apprentice.
I can't work through the usual calculators and it HAS come down to approaching individual lenders myself but I'm nothing if not fucking persistent.
I'm not going to put us into a situation we can't afford but like I said, we can afford to take the risk, too.

I'm careful though - I do do my homework - but it's stuff I haven't done before so it's useful for me to find out what I DON'T know, iykwim - and I know there's lots of that - but you'll have to trust me on the rest.

I've looked at sold prices and found a website which gives previously listed prices etc and I'm not going to rush but at the same time, I do have good reason not to take forever cos everything else dwindles in the meantime, so there's a point in just getting a foot in the door and I'm far away from looking for perfect but I'm also trying not to be a fucking moron.


To simplify what I have learned today would it be right to say that 'shared freehold' is actually almost exactly the same as leasehold - like, it's just another selling point to call it that for the sake of ignorant bastards like me?

It is DEFO the case that all of the converted houses ARE listed like that though, like it's some sort of selling point (and all of that is irrelevant in terms of the *value* if everyone else believes it's worth more, although that's also one bit of it's value that would hold, too, lol).

What I wish, is that I could just rent a reasonably priced flat, without some BTL cunt taking the piss.

 

[Puddy_Tat]

To simplify what I have learned today would it be right to say that 'shared freehold' is actually almost exactly the same as leasehold - like, it's just another selling point to call it that for the sake of ignorant bastards like me?

legally, it's leasehold, except the freeholder is a legal entity that you have a share in.

if it works well, it's probably better than having some remote / piss-taking landlord as freeholder.

What I wish, is that I could just rent a reasonably priced flat, without some BTL cunt taking the piss.

that kinda goes without saying...

 

[hash tag]

No. Owning a share of the freehold is owning a bit of the land under or around the property.
totally separate is the legal document which is a lease. The lease sets out who pays for what, ground rent, service charges, contingency funds and the like.
Conversions should be leasehold but this is not guaranteed. Conversions may also be sold with or without a share of the freehold.

I would never ever buy a flat, purpose built or converted flat without a lease. I wouldn't worry if it has a share of the freehold or not.

I would make sure it was leasehold and with the benefit of a long lease before I started spending money on solicitors. This is a basic question to ask of the people selling or the agents. Why pay solicitors to do this, when you can. Leave the real technical stuff to the solicitors

 

[hash tag]

PS. There is more you can do to save on solicitors, surveyors and the like if you think about it, look around , are careful and prepared to take a bit more of a risk

 

[sheothebudworths]

No. Owning a share of the freehold is owning a bit of the land under or around the property.
totally separate is the legal document which is a lease. The lease sets out who pays for what, ground rent, service charges, contingency funds and the like.
Conversions should be leasehold but this is not guaranteed. Conversions may also be sold with or without a share of the freehold.

I would never ever buy a flat, purpose built or converted flat without a lease. I wouldn't worry if it has a share of the freehold or not.

I would make sure it was leasehold and with the benefit of a long lease before I started spending money on solicitors. This is a basic question to ask of the people selling or the agents. Why pay solicitors to do this, when you can. Leave the real technical stuff to the solicitors

Ok. Thanks loads (all of you), that's really, really helpful.

The very first property I looked at, which was leasehold and as good as it could get for us, got listed as sold STC while I was on the phone to another lender on Thursday (where the first mortgage offer wasn't *quite* enough but that one was plenty ).

There's just really not much at all available to us (the one we saw today is a proper trek and needs shitloads of work) but while we don't buy, we're losing on rent and therefore on the deposit and therefore on the mortgage offer.

 

[Looby]

My mate owns a leasehold flat in a converted house. The downstairs people own the freehold. She’s been pretty lucky, they’re really nice and she got a fair price when extending her lease recently. Anything less than 70 years and the price shoots up though apparently. I’d never buy in a block, especially not one with a mix of owned and LA for all the reasons explained but I don’t know of anyone in a two flat conversion that’s had any major freehold problems. I have had one friend buy a flat with a short lease which cost her a lot to renew but her solicitor was a fucking tool.

It’s all very well people saying avoid a leasehold property but you’ve probably got very little choice in a lot of areas especially Brighton.

Good luck!

 

[Boudicca]

Owning a share of the freehold is mostly good as you are not getting ripped off by a managing agent overcharging you for doing things which don't need doing. Or the council - my friend has just received a bill for £19k for fixing the roof in her low rise council flat.

You can also extend your leases without it costing huge amounts.

However, you can run into problems if one flat has different ideas on how what maintenance needs to be done. But often this is set out in the lease.

Generally, you have more control with share of freehold, which I think is a good thing.

 

[hash tag]

Some of my neighbours own a share of the freehold and they have no input or control over costs, scheduling of repairs, maintenance etc.

 

[Leafster]

I lived in a flat for more than 20 years which was part of a group of low rise blocks. It was leasehold but we also owned the management company which administered to the estate. We had complete control over repairs and maintenance subject to the terms of the lease and the subsidiary agreement binding us to the management company. We appointed the directors and eventually agreed to appoint managing agents to run the estate on a day to day basis. We also bought the freehold together so we could grant ourselves 999 year leases. As far as I can tell, this is the ideal situation when it comes to owning a flat. Jointly, we had control over the costs and were fully involved in the planning of any future maintenance.

I would avoid any flat which wasn’t set up that way. Particularly, I’d avoid any ex local authority property as they have a habit of under-investing in maintenance so you can be stung with large one-off costs. You also have no say in who does the maintenance and local authority contractors seem to take the piss.

 

[sheothebudworths]

OMG - so basically, no one really agrees on what's best and everyone knows someone who got fucked over, or didn't, whatever the set up

 

[Looby]

Sorry!

 

[hash tag]

It's house buying for you. Everyone can find a horror story from somewhere.
just ignore and go for it and pray.

 

[Leafster]

I hope all the examples have helped to identify all the potential pitfalls so you won’t get caught out.
What ever the set up is for any flat you’re interested in, make sure you do your research and see how all the issues interrelate in your case.

 

[sheothebudworths]

No - seriously, I do appreciate all the advice - I know it's never going to be straightforward!
I just don't see I have much choice but to take a risk.
Have emailed every possible one now asking for further details of leases etc - which will inevitably mean I have to phone every single one of the fuckers back tomorrow

I think what it has done though is made me think it's probably worth us holding out for something that's at the very lowest of what we can afford though, just so that we can keep something in reserve and save more from having the lowest possible mortgage, even if that means living in a dilapidated shell for the next few years.