Equity Release For Leasehold Properties

Before getting into equity release for leasehold properties, we want to explain the difference between leasehold and freehold properties for any readers who may not be informed on this.

What is a leasehold property?

A leasehold property is a property that a homeowner is only entitled to for a set period of time. This timeframe is determined by the length of the lease in question. If you own a leasehold property, you do not own the land that it is built on.

You will already be familiar with leasehold properties as most apartments are leasehold (1). This is because apartments are usually structured in a block of flats, so it isn’t possible for one homeowner to own the land the flats are built on, and this means they tend to own just their property for a certain amount of time (usually 40-999 years).

Some houses are leasehold too, and owners sell them as leasehold for a variety of reasons. One possible situation is that they own the land surrounding the house, and they want to keep this land but generate an income from the person who purchases the lease.

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What is a freehold property?

As only 25% of houses in the UK are leasehold, you are more likely to have heard of freehold properties (2).  With a freehold property, you are the official owner of the property until you sell it, and you own the land it is built on.

This means you have to pay any maintenance costs on the property, but it also means you don’t have to deal with the stress of a lease running out, which would require you to find a new property (3).

Equity release is possible with freehold properties as there are no concerns about the lease running out and the homeowner no longer being entitled to the property. If you have a freehold property worth at least £70,000 and you are at least 55 years old, you can get started with equity release whenever you are ready.

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How Do I Know If My Property Is Leasehold Or Freehold?

If you aren’t sure whether your property is leasehold or freehold, you can check your title deeds. They will reveal who owns the freehold for the home.

Is It Possible To Take Out Equity From a Leasehold House?

If you are interested in taking out equity from a leasehold house, don’t be discouraged, as some equity release lenders will allow you to do this. You will have to provide them with certain documents such as your lease agreement, the service charge, buildings insurance, and your ground rent charges.

However, not all lenders will accept leasehold houses, so this is something you will have to check before making an application to a lender. An equity release adviser will be able to help you with this.

Don’t worry about your application being rejected, as your adviser will inform you before making the application if they believe you are not eligible. They will research different lenders to see whether any of them would accept your leasehold property, so being ineligible for one equity release plan doesn’t mean you cannot get involved with any of them.

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Is It Possible To Take Out Equity From a Leasehold Flat?

Again, it can be possible to release equity from a leasehold flat, but you would have to find a lender whose equity release terms accounted for this, and you would have to show them certain documents outlining the details of your lease.

The lender may make their decision based on a wide range of factors including the type of lease you have and the amount of time that is left on your lease.

If you have plenty of years left on your lease, there won’t be a fear that your lease is going to end while you are on the equity release lifetime mortgage scheme, so there is more chance your application will be approved.

Is It Possible To Take Out Equity From a Shared Ownership Property?

Yes, you can release equity from a shared ownership property, but you have to purchase the entire property with the equity release loan before you can spend it on anything else.

For some people, this means they wouldn’t be left with a large amount of money, so they find that it is pointless to release equity from a shared ownership home. This is particularly true if they were hoping to use their loan to purchase a second property as a holiday home or a rental house.

However, if you only require a small top-up to your income, it may be worthwhile to release equity from your shared ownership property, even if the amount released isn’t as high as it would be on a freehold property.

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What If Your Lease Is Too Short For Equity Release – Can You Use Equity Release as a Means of Extending Your Lease?

Yes, if your lease is going to run out in the near future and it is impacting on your eligibility for equity release, you could use an equity release product to earn more money, and put this money towards extending your lease.

You would first have to check that your mortgage lender allows lease extensions, and you would of course have to check the price of this.

Another thing you would need to do is find out how much money you could release through equity release, which you could either do by using our equity release calculator or requesting a personal quote. We also recommend speaking to an equity release adviser for an accurate figure.

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Do Equity Release Lenders Tend to Approve Properties With a Lease of Less than 100 Years?

Different lenders have different requirements, so you will need to speak to an adviser to find out whether there is a lender out there who would accept your lease length.

The general rule is that you will need at least 75 years left on your lease, but this is as lenient as it gets, so some equity release providers have a higher minimum requirement (4).

Is the Equity Release Process the Same For Leasehold Properties?

Yes, the only difference between releasing equity from a leasehold and a freehold property is that your entitlement to equity release may vary. However, once you have submitted your application and received your loan, the process will be the exact same.

You will still be able to spend your money however you like, you will still be able to choose between a lump sum of cash and regular instalments, you will still not be expected to make repayments, and you will still be able to protect your family’s inheritance.

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I Still Have Questions About Equity Release For Leasehold Properties – Can I Speak to an Equity Release Expert?

Yes, you can call us on 0330 058 1579 to speak to an adviser. Our lines are open all day from 8am-8pm, so even if you are in full-time work, you can find the time to get in touch with us.

We know that releasing equity from a leasehold property can seem like a lot of work, but the process is much less stressful when you get the professionals involved, including an equity release specialist, a financial adviser, an equity release lifetime mortgage lender, and a solicitor for legal advice and processes.

The small amount of stress it causes in the short term is well worth it to be able to release equity funds from your home. Equity release applications only tend to last one to two months, and the loan will be yours forever, so we believe the decision is obvious.

Having said that, we do know that there are risks involved with equity release, whether you have a leasehold property or a freehold property.

For this reason, we are keen to respect your decision, even if that means you decide to find an income another way i.e. returning to work, using credit cards, taking out a traditional loan, remortgaging your property, or downsizing.

Please call our 24-Hour Helpline: 0330 058 1579

References

[1] Freehold vs leasehold https://www.propertymark.co.uk/professional-standards/consumer-guides/buying-selling-houses/buying-leasehold-property.html

[2] Should I be wary of buying a leasehold house? https://www.quittance.co.uk/conveyancing/advice/buying-a-property/should-i-be-wary-of-buying-a-leasehold-house

[3] Leasehold vs freehold: what’s the difference? https://www.moneyhelper.org.uk/en/homes/buying-a-home/leasehold-vs-freehold-whats-the-difference

[4] Equity Release and Property Types https://www.onlinemortgageadvisor.co.uk/equity-release-mortgages/equity-release-property-types/