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Mortgage Basics - Buying a flat? Here are a few things to consider

Jun 28, 2016

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If you are looking to buy your own home and you are opting for a flat rather than a house, there may be additional costs and issues that you need to think about – here are a few things you’ll want to find out about your flat before you buy.

What is the difference between a freehold and leasehold property?

With a freehold property, you own the home and the land on which it is built. With a leasehold property, you buy the right to occupy a property. Flats are generally leasehold because you share the building with other people. When you buy a leasehold flat, there will be a lease on the property – which is an agreement between parties and should be checked by a solicitor before you buy.

How long is the lease?

With a leasehold property, you are effectively buying the right to live in that property for a set amount of time – and this time is set out in the lease. This can be any amount up to 999 years. As time passes and the lease changes hands, the time left on the lease reduces, so it’s important that you know how long is left. A solicitor will check this for you, but mortgage lenders tend to insist that properties have at least 80 years left on the lease in order to offer you a mortgage. You can get an extension on your lease, but there will be a cost attached to this.

What are service charges?

When you buy a leasehold property there are usually charges that you may not have considered, including ground rent and a service charge. When you are looking to buy the home it’s important that you find out exactly what these charges are, what they cover and how often these costs are reviewed.  These charges will also be taken into account by a mortgage company when they assess how much you can borrow.

What’s the difference between a landlord and a maintenance company?

With a leasehold property, there will often be a landlord who owns the property and a separate company that manages it for them. You’ll be dealing with one or both of them regularly, paying service charges to them and asking them to fix any issues that may arise.

Who is responsible for repairs to the building?

With a leasehold property, the service charge that you pay should include costs for general maintenance, but it might not include costs for more major repairs. For example, it may not cover the cost of a new roof for the block of flats. If a large repair is needed, you should make sure you know who will be responsible and how the costs will be shared.

What alterations can you make to your flat?

With a leasehold property you might not be free to make all the alterations you would like, so it’s best to find out if there are any restrictions on what you can or cannot do. These restrictions could range from the obvious, such as not being allowed to remove internal walls, to stricter restrictions such as not being able to change the colour of the front door. When you move in you may need to get written consent from the landlord before carrying out the work.

Are there any restrictions to the property?

Despite the fact that you have purchased the right to live in the property, there may still be some rules you have to adhere too. Are you allowed to own a dog? Can you play music after 11pm?  Estate agents are unlikely to know all the restrictions that affect a property when you view, so if you want to purchase the property it’s advisable to ask your solicitor what all the restrictions are. This will help you confirm that there are no limits in place which may inhibit your enjoyment of living there.

Do I need to arrange buildings and contents insurance?

With a freehold flat the building insurance is generally the responsibility of the freeholder, but as leaseholder you will need to insure all the contents of your flat. Again, it is best to check that the building is insured with the freeholder so you understand all the insurances and costs involved.

Are there any other additional costs involved?

Other costs can arise when you purchase a leasehold property. For example, management companies can make extra charges for changing their records when a new person joins or leaves a property. They could also charge an administration fee to provide information to your mortgage company.  

If you would like to apply for a mortgage, contact our friendly team on 0800 378 669 or contact us online here.

You can also request a copy of our Mortgage Guide, which is packed with useful information on the full mortgage process – here. 

Read all the other article in our ‘Mortgage Basics’ series:

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.