It is possible to get equity release on a leasehold property but, as with any financial product, there will be some key criteria a lender will want to check first.
What is a leasehold property?
Most flats and many new build homes in England are leasehold properties. This means you only own the property for a fixed period of time. You have a legal agreement with the landlord, or freeholder, called a lease while you live in the property. When the lease comes to an end, the ownership returns to the freeholder. You may be taken to court and ordered to pay for any damage if you don’t adhere to the conditions of the lease.
Your landlord will usually be responsible for the building’s insurance which will be part of the service charge.
What will an equity release lender want to know about your leasehold property?
Your lender will want to know how long you have left on the lease, the cost of any ground rent or service charges and any sell-on clauses attached to the property. This is because the lender will want to know that they can sell the home at the end of your equity release term. Furthermore, they will likely use a surveyor to check the value and condition of the property. Lenders will also check your lease agreement to make sure the ground rent charges meet their criteria.
What criteria can I expect equity release lenders to have for leasehold property?
Different equity release lenders will require different minimum terms of leases which could range from 75 years to over 100. In some cases, the lease term will be longer for younger customers, for example, 125 years for people aged 55-60 applying for a lifetime mortgage on a leasehold property.
It is possible to get equity release on a retirement flat but the number of lenders offering this might be more limited. Therefore, it is worth talking to a qualified equity release specialist who can advise you on how to get the right product.
This also applies to ex-council flats or former local authority properties.
What can the money released be used for?
Some people may choose to use the tax-free cash they release from their leasehold property to pay to extend their lease. If this is the case, your equity release application and lease extension will need to happen at the same time. Equity release can only happen once the lease extension has been approved. In some cases, an extension can take up to six months so it is worth starting the ball rolling with this in plenty of time.
Similarly, some people may choose to use the money from their leasehold property to buy the freehold, or a share of the freehold.
Our equity release experts are happy to answer your questions. Contact us for a friendly chat and initial assessment of your needs or check out our FAQ videos.
:: Use our Equity Release Calculator to work out how much cash you could release.
It is important to take expert advice on equity release before deciding whether it is right for you. Contact us to find out more from one of our highly trained advisors.
