Homeowners looking to remortgage their properties may face significant challenges if their leasehold has less than 70 years remaining. With only 45 years left on the lease, mainstream lenders are often unwilling to proceed, which can limit options for those seeking to refinance their mortgage.
Why Are Lenders Concerned About Short Leases?
Most lenders require a lease to have at least 70 years remaining at the time of remortgaging. This is because shorter leases can significantly decrease property value and make it harder to sell in the future. A lease with only 45 years left is often deemed too risky for lenders, leading to refusals for remortgage applications.
What Are Your Options if Remortgage Is Refused?
If you find yourself in a situation where your remortgage application has been refused due to a short lease, there are a couple of viable options to consider:
- Extend the Lease: This is typically the most straightforward solution. Leaseholders in England and Wales have statutory rights to extend their lease. Recent reforms have removed the previous requirement to own the property for two years before exercising these rights. A professional valuation is usually needed, but once the lease is extended, securing a mortgage or remortgage should be easier.
- Buy the Freehold: If you own a leasehold house, you may have the right to purchase the freehold from your landlord. Owning the freehold means you no longer have to worry about lease length, making your property more appealing to lenders and future buyers. In some cases, buying the freehold can be a more cost-effective long-term solution than merely extending the lease.
What This Means for Homeowners
For homeowners with short leasehold properties, the refusal of a remortgage can be a significant hurdle. However, taking steps to extend the lease or buy the freehold can open up new opportunities for refinancing. It is essential to weigh the costs and benefits of each option, as they can vary depending on individual circumstances and property values.
Frequently Asked Questions
How long does it take to extend a lease?
The process of extending a lease can vary, but it typically takes several months to complete, depending on negotiations and the need for a professional valuation.
Is it worth buying the freehold?
Buying the freehold can be more beneficial in the long run, as it eliminates future lease issues and can enhance property value. It’s advisable to consider the costs involved and consult with a property expert.