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Mortgage Advisor & Director
Looking to buy a flat?
If you are considering getting a mortgage to buy a flat, there are a few distinctions between buying a house and buying a flat that you need to know.
Freehold vs Leasehold
Flats and apartments tend to be offered on a leasehold basis.
Leasehold means that you have a lease allowing you to live in the property for an agreed number of years. By comparison, houses generally tend to be offered on a freehold basis, meaning that the freeholder is the ultimate owner of the property itself and is responsible for all upkeep.
A few more points to take note of on leasehold properties:
- You'll need to pay annual 'ground rent' to the freeholder to allow maintenance and repairs of communal areas.
- The freeholder's responsibility under the lease agreement is to ensure the maintenance of the property.
- Leasehold properties are virtually nonexistent in Scotland.
Getting a mortgage on a flat can be a challenge.
Fewer lenders are willing to provide a mortgage on a leasehold property than on a freehold property.
Reducing the pool of available lenders reduces the chances of getting the best rates and may mean you need to increase the size of your deposit. This is where it is essential to get in touch with a whole-of-market mortgage broker such as Teito, who can help you to secure the best deal possible.
The main issue that lenders tend to have with leasehold properties is the fact that there tends to be ambiguity in who is responsible for what. If the property fails to be correctly maintained, this can negatively affect the value and then, in turn, impacts on the mortgage lender. Another issue is the increased possibility for disputes between neighbours that can result from incorrect maintenance; this can reduce the number of interested buyers in the future.
Several well-known lenders do not lend on freehold flats at all. For this reason, it is worthwhile engaging a whole-of-market mortgage advisor who can help you get the best rates on your new mortgage. Please speak to one of our experts today or complete our online form to get the process started.
How does the length of the lease impact on the mortgage application?
The longer the lease, the better.
A longer lease directly relates to the value and affects the number of potential mortgage providers. Lenders will generally have a minimum lease length they will accept, which can typically range between 70 to 90 years. If less than 70 years remain, then the chances of securing a mortgage reduce significantly.
What is a 'share of freehold' flat?
A share of freehold basis is where the owners of a number of flats jointly own the freehold for the building or converted house and are all responsible for the maintenance and repair; setting up a company to do so. Up to four owners can share 'share of freehold' properties. From the perspective of a mortgage provider, 'share of freehold' properties are treated in the same way as leasehold properties.
Eligibility for flat mortgages
The requirements are no different in this area than for any other mortgage; the difference is in the property itself. Standard criteria such as income, credit history and age will still apply.
What sort of deposit will I need?
For flats, the Loan to Value ratio is generally lower, so you are likely to need a larger deposit for a flat than for a house.
Get expert mortgage advice tailored to your property type
What if I have bad credit?
You can still get a mortgage if you have bad credit.
Our advisors can help you to get the best deal possible, complete our online form today to start the process. Read our guide to bad credit mortgages to get the full picture.
Flats as second homes
If you are interested in purchasing a flat as a second home, several mortgage providers can lend on this basis. Be aware that your existing mortgage commitments will be taken into account.
Buy to let flats
If you are considering renting out your flat, there are plenty of Buy to Let (BTL) mortgage options available to you. The same general standards of Buy to Let mortgages will apply; higher interest rates and lower LTV values.
Read our guide to but-to-let flats to learn more.
Holiday flats
You can get a mortgage on a holiday flat; the type of mortgage will vary depending on whether you are looking to rent it out or not. If you are renting out the flat when you're not using it, you will need a BTL mortgage. If not, the mortgage would be on a second home basis.
Mortgages on Retirement flats
To secure a mortgage on a retirement flat, you are likely to need a specialist lender. Our advisors can help; contact us to learn more or start the process. For standard flats, lifetime mortgages can be arranged assuming there is sufficient time outstanding on the lease.
What about Granny flats?
Granny flats are a distinct kind of property; a 'secondary dwelling' attached to an existing property.
It can be challenging to get a mortgage on a granny flat due to the number of individuals involved. Also, if the facilities provided by the granny flat are comprehensive enough to allow it to be rented out, it may warrant a buy-to-let mortgage. This is a niche situation, and we would recommend getting in touch with one of our advisors who will be able to help.
Mortgages for high-rise blocks
It may be more difficult to secure a mortgage on a high rise block of flats.
High-rise is anything above the 5th floor in the eyes of mortgage providers. The type of block makes a difference; modern blocks are easier. Beware of concrete blocks, as these can be viewed as 'non-standard construction'; limiting the pool of lenders and reducing your chances of getting the best rate. A lift is also generally a must for high-rise flats.
Small-flats
Mortgage lenders generally expect flats to be a minimum of 30 square metres. Anything below 12 square metres is illegal, according to the 2004 Housing Act. This is something to be aware of if looking for studio or bedsit flats, particularly in London where prices are higher.
How can I learn more?
Our advisors have helped many applicants looking for a mortgage on their new flat.
To start the process, you can either complete our quick and easy online form or get in touch to speak to an advisor.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.