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What are the benefits of buying the freehold?

I bought a flat in Oct 2006. I own around 60% of it and the rest is paid by the mortgage. I have no plans to sell the flat within the next 2 years. I let it out to 2 tenants who cover the mortgage plus a good income. There is 90 years on the lease. I have spoken about buying the freehold with the only other flat owner. I would like to know, when is a good time to buy the freehold? What are the benefits? I have heard that it is good if you plan to sell as it increases the value but for my situation now, it does not add any value. I pay off my mortgage with the rent and investing more cash into the flat (paying off the mortgage or buying the leasehold) is not the best way to invest money given the low interest rates. How can I estimate the cost of the freehold, without getting a survey done? What considerations should I think about, paying off the mortgage or buying the freehold. Thank you. P

Asked on Apr 25 2011, Home Finance in London | Report content

Answers (6)

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  • There is no pressing reason for you to buy the freehold now but you need to bear in mind that as the length decreases, the cost of purchase will go up. Some landlords ask up to £15000 to renew once a lease gets to 75 years or less. That is one benefit to buy now. You will also gain control of the maintenance. This may not be so important now if the management is satisfactory, but the freeholder could change to someone you do not get on with or do not trust. I suggest you find out a price and if possible, buy!

    Answered on Apr 26 2011, Report content
  • Hi The previous poster is correct in that the cost of the lease will increase as the remaining period reduces, but this is unlikely to have a major impact until you drop below 75years. At this time I would not suggest it worth paying 1000s of pounds to extend the lease. The interest on your mortgage annually is probably greater than the annual increase on a lease entension would be. If you have disposable income Id consider it better to slash the mortgage costs by reducing the term of mortgage, or paying a one-off payment to lower the monthly costs. Even though you suggest in your post you have a low mortgage interest rate, its still a lot of money annually to pay if you do not need to. Buying the freehold, or a share of, will add some value, but if its NOT your intention to sell at this time then this sales figure is currently meaningless. I would suggest re-visiting the buying of the freehold in 5-10years time when the cost of extending is likely to be almost the same anyhow. If you need any further help or advice please do not hesitate to get in touch. thanks XanderMatthew Estate Agents

    Answered on May 27 2011, Report content
  • XanderMatt is is spot on with his opinion

    Answered on Jun 12 2011, Report content
  • Buy the freehold, if there is enough people willing to buy their share, you need to speak to your landlord, if it's a lease the landlord wants money for the upkeep, if you have a flat roof they love you plus people like to own their property.

    Answered on Jul 16 2011, Report content
  • Whether to buy or not depends on whether you mind paying the annual lease charge. If it's "peppercorn" (ie. minimal) and the freeholder is paying for your building's insurance, then is it worth buying out? I can't remember the source but I have read that the market value of a leasehold property with more than 100 years left on the lease is roughly the same as a freehold property. On the other hand, one sales agent has told me that when selling a property 30% of all potential buyers don't consider leasehold properties so in some respect you limit your market marginally. For working out the cost of buying the freehold (or extending the lease), go to the leasehold advisory service for a free online calculator. By they way, my lease fell below 80 years on my 1 bedroom flat and the costs of extending the lease or buying out the freehold were roughly the same and went up 2000 pounds every year I did nothing about it! So don't let that happen!!

    Web reference:

    Answered on Jul 27 2011, Report content
  • Unless there is a substantial drop in the value of the property, there is no time in the future when it will be cheaper to buy the freehold. Benefits may include increased control over the management of the property and consequent savings, increased marketability of the property should you wish to sell, an end to future expenditure / increased cost on lease extension or acquiring the freehold.

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    Answered on Apr 11 2013, Report content

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