Can You Get Equity Release on Leasehold Property?

Do Leasehold Properties Qualify for Equity Release?
Contributors: Nicola Date, Katherine Read. Edited by Rachel Wait & Reviewed by Francis Hui
Can You Get Equity Release on a Leasehold Property? Discover the Circumstances Under Which You Can Release Equity on a Leasehold Property & Find Out What Information You’ll Need to Apply. It’s All Here.

Accessing the equity in your property without having to sell or move has tremendous appeal for many, but can you get equity release if you have a leasehold property?

The equity release market in the UK is growing as more homeowners over the age of 55 years enjoy lump sum tax free cash.

Owning leasehold property means that you own your house, flat or apartment but not the land it’s built on, and this can affect your access to equity release.

Looking for information on how you can get equity release on leasehold property?

As experts in our field, we discuss the following in this article:

    Our equity release experts have researched the industry to bring you all the information you need.

    Here’s what we found.

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    Can I Get Equity Release on a Leasehold Property?

    It’s possible to get equity release on a leasehold property, the lender will weigh other considerations before approving the lifetime mortgage or home reversion plan. 

    The lender will need to consider any service fees, ground rent, sell-on provisions, and ‌the number of years left on the lease.

    The leasehold property must be your primary residence and have a lease with at least 75 years left on it. 

    Most lenders will require you to extend the lease, ranging in length from 90 to 120 years. 

    And you’ll need to pay for legal counsel and services to have your current lease extended before applying if it is too short.

    Important to note.

    Even though you can deduct application fees from your loan amount, it may still be possible to extend the lease using an equity release loan if you can’t pay the costs. 

    The lease extension process can take up to 6 months, and you won’t be able to apply for a loan until the lease has been formally extended.

    Can I Get Equity Release on a Leasehold House?

    You can get equity release loans on leasehold homes. However, you will need to pay the leaseholder a ground rent-fee. 

    The equity release lender will need to analyse the lease agreement and determine whether the ground rent charges match their requirements.

    Can I Get Equity Release on a Flat?

    You can get equity release for a flat, but as it is a leasehold property, you must adhere to certain leasehold conditions.

    These conditions include having a leasehold agreement with at least 75 years remaining.

    Lenders will have guidelines on the kinds of leasehold flats that they will ‌lend on. 

    Equity release is possible for a variety of flats. The lender will request a copy of the lease agreement to confirm that it satisfies their lending requirements.

    Some lenders will give you equity release for ex-council apartments. However, the lender will also do their own investigations to determine eligibility.

    Because of the various restrictions and fees associated with retirement flats, this lending inquiry may be a little more difficult. 

    However, there are lenders out there who will ‌consider lending on homes with age restrictions.

    How Does Equity Release Work on a Leasehold?

    The procedure for releasing equity on a leasehold starts with the equity release lender valuing the property.

    The lender will also examine ‌the deeds and inquire about the leasehold in order to determine whether equity release is workable.

    The lender must determine whether there is enough equity in the leasehold property.

    The equity release lender will then make an offer with any terms if equity release is feasible.

    The legal procedure can start as soon as the equity release offer is approved.

    Is Equity Release Available on All Flat Types?

    Yes, equity release is available on all flat types.

    Here’s more information.

    Can I Get Equity Release on a Purpose Built Flat?

    Equity release is available on purpose-built apartments.

    A purpose-built apartment building differs from a house partitioned into two distinct homes. 

    Most lenders demand that the apartment have a lift if it is over four stories high, besides meeting other loan requirements.

    Can I Get Equity Release on Ex-council Flats?

    Only a few lenders offer equity release on former council apartments. 

    Most lenders will require more details, such as the number of council-owned apartments in the apartment building.

    Can I Get Equity Release on a Studio Flat?

    A studio flat or apartment is eligible for equity release. 

    Sometimes one-bedroom apartments are mistakenly referred to as studios. The only thing missing from a proper studio apartment is a bathroom.

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    Why Lenders Won’t Allow for Equity Release on Certain Properties

    Lenders are concerned with the eventual selling and recovering of their investment. Unless they are simple to resolve, any circumstances that cast doubt on their capacity to resell will raise a red flag for them. 

    A property ‌in a flood zone¹, one that is close to high-voltage power lines, or a house with asbestos² are all examples of safety issues that will raise red flags.

    Other bad characteristics include a home in an unappealing neighbourhood, one with single-skin walls, or a property with commercial neighbours. 

    A broker could offer advice on how to handle some of these problems prior to the application process.

    Properties That Don’t Qualify

    There are properties that don’t qualify for equity release and some that lenders are stricter with.

    Here’s more:

    • Park homes: Because the property is a mobile home on a protected site, it is ‌out of the ordinary, as the homeowner doesn’t own the land or have a leasehold over it. This makes equity release on a park house impossible because the lender has nothing to use as collateral for the loan.
    • Properties with a Shared Ownership structure: To qualify for equity release, a borrower must own the entire property outright. You wouldn’t be able to get equity release on a shared ownership property because you only own a section of your property and either a developer or local council is a co-owner.
    • Business properties: You couldn’t take advantage of equity release if you use a property, even partially, for any commercial endeavours. This includes property that is used as a hotel, leased to long-term renters, or rented out on AirBnB.
    • Vacation homes: one requirement for equity release is that the property from which you are withdrawing the funds must be your primary residence. Although you can utilise the money to help you buy a second property, a vacation home or even a second home wouldn’t meet the requirements.
    • Studio and basement apartments: Unfortunately, lenders’ typical aversion to these types of properties carries over to their equity release schemes.

    How Do I Know if My Property’s Leasehold or Freehold?

    Your title deeds contain the information needed to determine if your property is leasehold or freehold. If you’re unsure, ask your lawyer or an equity release lender to look at it for you.

    You can get a free copy of your title deeds if you are unsure to see if they registered your property as leasehold or freehold with the land registry³.

    What Information Will I Need to Provide Regarding My Leasehold Flat?

    If you want to apply for equity release on a leasehold property, like a flat, you will need to furnish your supplier with a few extra pieces of information.

    The service fees payable for:

    • Maintenance, repairs, and insurance.
    • Central heating, elevators, porters, lighting and cleaning of communal spaces (if offered).
    • The costs of management service rendered by the landlord or a qualified managing agent, as well as contributions to a reserve fund, may be included in the charges.
    • Your building insurance. If the management company covers this in your service fees, you will need to get a copy.
    • Details of your landlord’s ground rent. This is a requirement of your lease‌ for using the land on which your property is situated, and your lease will specify this.
    • Details of the sell-on fees, the “exit” or “transfer” fee you or your beneficiaries will have to pay when you sell or rent out the property. This is usually a percentage of the property market value at the time of the sales part of the leasehold agreement.

    How Many Years Do I Need to Have On My Lease to Get Equity Release?

    Each lender will have a different minimum leasehold tenure requirement for equity release. 

    You will typically require a lease with at least 75 years remaining. Some lenders could demand a lease term of at least 90 to 125 years.

    Even if the leasehold doesn’t have the required number of years left, you could occasionally still get the option to take up a lifetime mortgage. 

    However, you might have a lower loan to value ratio (LTV) and/or a higher interest rate.

    What if My Lease Length Is Too Short?

    If your lease is too short, you must first extend the leasehold to qualify for equity release. 

    When you extend your lease, you’ll have to pay appraisal and legal fees. 

    There is new legislation about to take effect that will enable leasehold property owners to increase their lease by up to 990 years without having to pay any ground rent.

    Which Lenders Will Consider a Lease of Less Than 100 Years?

    Some lenders will consider a lease of less than 100 years with differing criteria.

    Lenders may consider the sum of the age of the youngest borrower, plus the number of years remaining on your lease, and if this is at least 160, you could qualify for equity release.

    For example, if the youngest borrower is 70 years old, the lease must have at least 90 years left on it as 70 plus 90 equals 160.

    Can I Use Equity Release to Extend My Lease?

    You can apply for equity release and lease extension simultaneously if you can’t pay for a leasehold extension. 

    The equity release firm will pay the leasehold extension fees, and after it grants the leasehold, subtract the fees from your loan balance.

    You won’t repay the remaining loan balance until it approves the leasehold. 

    The leasehold application process can take up to six months on average, which means you will have to wait the same ‌time to receive your loan.

    Common Questions

    What's the Difference Between a Freehold & Leasehold Property?

    Can You Get Equity Release on a Grade 2 Listed Building?

    What Criteria Might Be in Place to Get Equity Release on a Flat?

    In Conclusion

    If you want to get equity release on a leasehold property, lenders will weigh various considerations before approving a lifetime mortgage or home reversion plan. 

    Lenders will consider any service fees, ground rent, sell on provisions, and ‌the number of years left on the lease.

    The leasehold property must be your primary residence and have a lease with at least 75 years left on it. 

    Some lenders will require that you extend your leasehold, which you can do simultaneously when applying for equity release. 

    Leasehold properties that qualify for equity release include houses and flats or apartments. 

    If you are unsure whether your property is freehold or leasehold, your title deed will contain this information.

    Provided you meet the criteria above, you can get equity release on leasehold property.

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