Can I Get Equity Release on Leasehold Flats?

Equity release can provide a very easy way to access value that is tied up in the cost of your home. If you own a leasehold flat and are in need of some of the wealth tied up in your assets, then you’re probably wondering: “Can I get an equity release on my leasehold flat?”

While the simple answer is yes, you absolutely can, the reality of equity release on leasehold property can be a little more complicated.

In fact, there are many considerations that you should know before applying for an equity release and understanding the potential impact is crucial to making the right decision for you.

The good news is – we’re here to help. In this article we will guide you through everything you need to know about equity release, paying particular focus to equity release on leasehold flats and your options so that you can make the right financial choice for you. Let’s begin.

What is a Leasehold Flat?

At its core, owning a leasehold means that you own your home, but not the land it stands on, and are most commonly either flats or apartments.

For example, it is a common occurrence for someone to purchase the leasehold of a single flat that makes up a tower building. While the freeholder (or landlord) owns the building and the land, the leaseholder will have purchased a lease for their specific flat.

Another way to view this, is that leasehold ownership is a long tenancy agreement, encompassing the right to that property for a set period of time.

Because the freeholder owns the building, it is common for there to be additional costs with a leasehold property. These costs would include ground rent and service charges to maintain any communal areas or repairs that are needed.

The term of a leasehold will generally be for between 99 and 125 years, with some lease agreements being up to 999 years. Though this might seem like an incredibly long time, the length of the leasehold will directly affect the property’s value, often improving mortgageability and is beneficial to both lender and buyer.

Looking to learn more about different tenures? Read our latest article – What is the Difference Between Freehold and Leasehold – and discover all the advantages and disadvantages of each.

What Are the Requirements to Get Equity Release on Leasehold Flats?

While equity release schemes are certainly available for leasehold flats, it is important to note that lenders will have a very clear equity release criteria that your leasehold property will have to be in accordance with.

Most lenders will require a minimum of at least 75 years left on the lease at the time of your application. However, some lenders will have their own specific criteria calculations, often calculating the remaining lease term against the youngest borrower.

Beyond the lease length, lenders will also look to assess the terms of the leasehold and whether they are both fair and manageable. Excessive ground rent, or high service charges may make lenders reluctant to lend. This is due to the fact that high upkeep costs could negatively impact the properties overall value in the future market.

In addition to meeting the minimum age requirements, lenders will often request an up-to-date surveyor, to confirm that the property is in good health and could be sold with relative ease, should it be necessary.

If you’re looking at equity releases and are unsure about your equity release requirements, it is always best practice to work with a trusted broker that is trained in equity release. Here at Boon Brokers, our expert staff have been qualified in the complexities of equity release, and can match your financial situation to a lender that is best suited for your requirements.

What is the Minimum Lease Length to Get Equity Release?

When asking how your lease length will affect your equity release, it is perhaps best to use the following statement as a rule of thumb: the shorter the lease, the lower your property value could be.

A point that we’ve just touched on, and a major concern for leasehold owners, is whether or not their lease is long enough to qualify for an equity release scheme.

While we have previously noted that most lenders will require a lease with at least 75 years remaining, it is only natural that it is possible to find lenders who may accept shorter terms, and who will only accept longer lease terms.

Working alongside a trusted whole-of-market mortgage broker – like Boon Brokers – can help you find a lender who matches your current situation, and can help you find the best deal for your equity release scheme and lifetime mortgage.

In the case that your lease is too short, it might be necessary for you to extend the overall lease term time, before applying for an equity release. It is important to note that extending the lease term length could result in extra charges. However, it is possible to arrange funds from the equity release to cover any expense.

Extending your lease can take several months to process, and so it is best to plan ahead. If you’re looking into equity release as a viable option, discuss with your mortgage broker the options that are available to you now and how you can best plan for the future.

What Leasehold Documents are Needed?

When you apply for an equity release on leasehold flats, there are a variety of documents that you will be required to present to the lender. These documents include:

• Original Lease Agreement
• Number of years remaining on the lease
• Age of youngest borrower
• Ground rent
• Sell-on fees

While all of these documents are required, the most important document you will need is your original lease agreement. This will outline all the crucial information that lenders will want to know, including how many years remain on the lease, ground rent, and any additional sell-on fees that may impact the future resale value of the property.

It is also common practice for lenders to request proof of buildings insurance, to ensure that the property is protected.

In addition to these main documents, some lenders will ask for a valuation report from an accredited surveyor. This is to ensure the condition of your leasehold flat or property is in good condition, or whether there are any integral fixes that would negatively impact the future valuation price.

How Do I Get Equity Release on a Leasehold Property?

If you’re looking into securing an equity release on your leasehold property, the very first step you need to take is to check your lease conditions. Take the time to understand all of your agreed information, including the remaining lease term, existing ground fees, any ongoing maintenance fees, etc. This will help speed the process up quite considerably in the long run.

Next, contact a mortgage broker to help explore your available lenders. Make sure to use a trusted whole-of-market broker – like Boon Brokers – to ensure that you have access to the entire pool of lifetime mortgage lenders, finding you the best offer available.

Once you have decided on your chosen lender and meet the specific requirements, a property valuation will usually take place in order to determine how much equity you would be able to release.

Finally, upon the application’s approval, you will be able to access the funds as a lump sum, or in smaller withdrawals if preferred.

Here at Boon Brokers, we always suggest and welcome family members to join in on any meeting or discussion about your equity release plans. This helps ensure that everyone understands the process fully, and that the best informed financial decision is made in your best interests. Of course, whoever is welcome is completely down to your own personal discretion.

How Can I Check If My Property is Leasehold?

Are you unsure if your property is on a leasehold agreement? Don’t worry – there are a couple of easy ways to check.

Firstly, check your title deeds. The title deeds are a legal documentation that outlines all the important details of your property purchase, including whether the purchase was for a freehold or leasehold tenure.

The other method of checking is to check the HM Land Registry website. The HM Land Registry keeps records of registered properties, and so you can search online for the status of your home.

Will I Be Able to Use Any Type of Leasehold Flats?

As we previously mentioned, each lender will have a specific equity release criteria that your leasehold property will have to be in accordance with. That is to say, if your leasehold property does not fit into the lender’s criteria, you will not qualify for equity release.

For example, lenders will tend to be more cautious with leasehold properties that are:

• High-rise buildings
• Flats with significant service charges
• Onerous ground terms
• Leasehold agreements that include restrictive lease terms

In any of these cases, you may find that you do not fit the criteria of certain lenders and would not qualify for equity release. As such, checking your eligibility is a crucial step before applying, and can help you avoid any unexpected hurdles with your application.

Working with a trusted mortgage broker can help you find a lender that you’re eligible for. As a whole-of-market broker, Boon Brokers has access to a wide-range of trusted lenders, helping guide you through the application process from start to finish, to ensure you secure the equity release you need.

How An Insurance Broker Can Help With Your Equity Release

It’s no secret – equity release has had a rocky history. Fortunately, equity release products now have a variety of safeguards in place that make it one of the safest mortgage products on the market today.

Equity release has evolved into a safe method of accessing money that is tied up in your property, allowing you the freedom to live the life you want before you pass, or are moved into long-term care.

Boon Brokers is a Whole-of-Market Mortgage, Insurance and Equity Release Broker. As specialists, we can answer any questions you may have, access the whole market of lenders, and keep you informed each step of the way.

Working with a trusted Insurance Broker can help you navigate the entire process of your equity release.

In short, our professional guidance can help ensure that you secure the best possible deal when it comes to your equity release, helping you avoid any potential pitfalls, making the entire process easy for you.

Contact Boon Brokers today to discuss your equity release goals – completely fee-free.