What is a freehold?
The freeholder of a property owns it outright, including the land it’s built on for as long as you wish. On the other hand, a leasehold property is only owned for a set period and the land the property is built on is not owned by the property purchaser.
There are no leases to consider with a freehold property, but you will be responsible for repairs or damage to the property. With a leasehold property, you will pay a service charge to cover damage which will then be sorted out by the landlord. Leaseholders will also pay a ground rent fee which can work out at up to around £700 per year.
Buying the freehold
If you don’t own the freehold of your property, someone else will. It may be possible to buy the freehold from the current landlord; however, there is no obligation for the freehold to be sold.
Whether you currently own a flat or a house, the legal steps and rules are different. With a flat, you’ll need to buy a share of the freehold, and with a house, you might have the right to buy the freehold.
Advantages of buying a freehold property
Whilst you can remortgage a freehold property, it can be tricky to remortgage a leasehold property. Most lenders generally want to see at least 70 years remaining on the lease, which means if you have less than that you will struggle to remortgage your property.
2. Service charges
With freehold, there are no set charges, consequently suggesting that you’ll not be stung with added household costs. With leasehold, you’ll pay ground rent and other service charges.
3. Full ownership
You’ll have complete ownership of the property and land (so long as you keep up with your mortgage repayments, and/or pay off your mortgage).
4. Property value
Purchasing a share in the freehold does tend to increase the worth of the property, but it also adds to the purchase price.
5. More control
Deciding how much to spend on maintaining the property, and which suppliers to use means you have a greater sense of independence as a homeowner.