Whether you can get a mortgage with a short lease depends on the lender. Many lenders won’t approve a mortgage if there are 70 years or less remaining on the lease.
When buying a house or flat in England and Wales, it will either be leasehold or freehold. If it’s freehold, you own the property and the land it stands on. With a leasehold property, you own the property for a specified period but not the land.
Lease terms can be as long as 900 years, but most are typically between 90 and 120 years. It’s crucial to verify the lease length through the Land Registry or your solicitor before purchasing a leasehold property.
Reviewing the lease with the Land Registry will provide the exact date the lease was granted and how much time remains. This helps ensure you know the accurate length of the lease.
The length of the lease affects mortgage approval and property value. Properties with less than 70 years left on the lease may be harder to sell and obtain financing for.
Most lenders want 70+ years left on the lease at purchase, and many want 80+ years remaining at the end of the mortgage term. Below 80 years a lease gets expensive to extend (marriage value); below ~70 years you’re into cash-buyer or specialist-lender territory. If you’re buying a short-lease flat, price the extension cost in before you offer.
What is a Short Lease?
A lease defines how long you own a property on land owned by someone else (the freeholder). This usually applies to flats but can also apply to some houses. When the lease ends, the property reverts to the freeholder unless the lease is extended.
Short leases can be problematic for buyers as many high street lenders won’t lend on properties with less than 70 years remaining. As the lease term shortens, the property’s value decreases, especially in the final years. Additionally, some valuers hesitate to recommend properties for a mortgage if there are fewer than 80 years left on the lease, making it crucial to choose the right lender from the start.
A lease defines how long you own a property on land owned by someone else (the freeholder). This usually applies to flats but can also apply to some houses. When the lease ends, the property reverts to the freeholder unless the lease is extended.
Short leases can be problematic for buyers as many high street lenders won’t lend on properties with less than 70 years remaining. As the lease term shortens, the property’s value decreases, especially in the final years. Additionally, some valuers hesitate to recommend properties for a mortgage if there are fewer than 80 years left on the lease, making it crucial to choose the right lender from the start.
When should I extend the lease?
The potential for significant capital growth for savvy borrowers has increased due to changes in the law in 1993. This change allows individuals or businesses who have owned a property for at least two years to apply for a lease extension, which the freeholder must grant at a fair market cost.
You can apply for a lease extension after owning the property for two years. Alternatively, when purchasing a property, the vendors can exercise their right to extend the lease and pass this on to you. It’s best to apply for an extension early, as the cost increases the shorter the lease becomes.
Extending a lease can be costly, especially if the current lease is short. Consulting a professional is essential when calculating these costs due to the many variables involved.
If you need to extend your mortgage term with the new longer lease, there are two options. You can either approach your existing lender for a further advance or seek a new lender for a remortgage or a Second Charge on the property, which requires the existing lender’s consent.
My property has a short lease, can I still get a mortgage?
For leasehold properties, such as flats, apartments, and maisonettes, a short lease can make it difficult to secure a mortgage. A lease term of less than 60 years is generally considered short and can negatively affect the property’s value. Properties with very short leases might be unmortgageable and can only be bought with cash.
By law, you can extend your lease for an additional 90 years. This formal lease extension also reduces the ground rent to a nominal amount, meaning no significant ground rent is paid. To take the formal, or statutory, route, you must be the registered owner of the property at the Land Registry for at least two years. This process does not require the mortgage lender’s consent.
For informal lease extensions, there is no two-year ownership requirement, and you can approach the freeholder at any time. However, if the property is mortgaged, you will need the lender’s consent, which can incur additional costs.
The lease term is a crucial factor for lenders when considering mortgage applications for both purchases and remortgages. Short leases can make it harder to obtain financing or to remortgage for better terms.
Key Takeaways:
Mortgage lenders typically require a lease to have 30 to 40 years remaining after the mortgage term ends. This means a 35-year mortgage typically necessitates a lease of at least 75 years. Most lenders avoid properties with leases under 70 years or even below 80 years, considering them short.
For properties with leases between 80-85 years, buyers might negotiate a lease extension with the seller, arrange a valuation, and agree on cost responsibilities. However, leasehold properties may be costlier and more complex than freehold alternatives.
Moreover, mortgage rates for leaseholds often increase with shorter leases. Additionally, conveyancing costs are higher due to more legal documentation. Seeking clear and reliable legal advice is crucial given the complexity and potential expenses involved.
More Leasehold guides from Property Accelerator
Frequently asked questions
Can I get a mortgage on a flat with a short lease?
Yes, if enough years remain. Most lenders want at least 70 years left at purchase and 80+ at the end of the mortgage term. Below that you are looking at specialist lenders or a cash purchase, with a lease extension straight afterwards.
How many years is too short for a mortgage?
Under 70 years remaining is the danger zone — most mainstream lenders decline. Between 70 and 80 years the lender panel shrinks and the eventual extension costs more because of marriage value.
Should I extend the lease before or after buying?
Under the leasehold reforms the old two-year ownership wait has been removed, so you can start a statutory extension immediately. Many buyers negotiate the price down to reflect the extension cost, then extend once they own it. See gov.uk lease extension guidance.
Is a short-lease flat a bad investment?
Not necessarily — it can be a bargain if the discount more than covers the extension cost. The risk is buying without a proper extension valuation and finding the numbers do not stack. Always get that valuation first.
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