Leasehold vs Freehold: What’s the Difference and Which Is Right for You?

When buying a property in the UK, you’ll come across two main types of ownership: Leasehold vs Freehold. Understanding the differences between these two can help you make a well-informed decision that aligns with your financial and long-term property goals. In this guide, we break down the key distinctions, the advantages and disadvantages of each, and how they impact your mortgage options.

What is Freehold Ownership?

A freehold property means you own both the property and the land it stands on outright. This is generally considered the most straightforward and desirable form of homeownership.

Pros of Freehold:

Full ownership of the property and land
No ground rent, service charges, or lease agreements
No time limit on ownership
Easier to sell compared to leasehold properties

Cons of Freehold:

Typically more expensive than leasehold properties
Maintenance and repairs are solely your responsibility

What is Leasehold Ownership?

A leasehold property means you own the property for a set period but not the land it stands on. Instead, the land belongs to a freeholder (also known as the landlord), and you lease it from them for a specific duration.

Pros of Leasehold:

Often cheaper than freehold properties
External maintenance may be covered by the freeholder (e.g., apartment buildings)
Ideal for flats and some new-build houses

Cons of Leasehold:

Lease terms can expire, affecting property value
Ground rent and service charges can increase over time
Restrictions on modifications and property use
May require lease extension, which can be costly

How Lease Length Affects Your Mortgage

Mortgage lenders typically prefer leasehold properties with a lease term of at least 70-80 years. If a lease drops below 70 years, it may be harder to secure a mortgage or remortgage. If you’re considering a leasehold property, it’s crucial to check the remaining lease term and understand the costs involved in extending it.

If you're unsure about how much you can afford when purchasing a leasehold or freehold property, use our Mortgage Affordability Calculator to get an estimate.

Which One is Right for You?

Freehold is Best If:

You want full control over your property
You prefer long-term stability without additional fees
You don’t want to deal with lease extensions or ground rent

Leasehold is Best If:

You are buying a flat or a property where external maintenance is handled for you
You are comfortable with lease terms and associated costs
You are considering a lower upfront cost compared to freehold properties

Key Considerations Before Buying a Leasehold Property

Ground Rent & Service Charges: Ensure these are reasonable and won’t increase unpredictably.
Lease Length: If it’s below 80 years, consider the cost of extending it.
Restrictions: Check for limitations on renting out or modifying the property.
Freeholder’s Reputation: Research the landlord or management company to avoid potential disputes.

Getting a Mortgage for Leasehold vs Freehold Properties

Different mortgage lenders have varying criteria when it comes to leasehold and freehold properties. If you need expert mortgage advice tailored to your situation, our team at Possible Mortgages can help you find the best deal. Get in touch with us via our Contact Us page for personalised assistance.

Additionally, understanding your credit score can help you secure better mortgage rates. Check your credit standing with our Credit Report service.

Final Thoughts

So, leasehold vs freehold which one is right for you? Both leasehold and freehold properties have their benefits and challenges. Your decision should depend on your financial situation, long-term goals, and personal preferences. If you’re still unsure, speak to a mortgage expert who can guide you through your options.

For more expert insights, visit our Knowledge Hub for mortgage tips and property guides.

Your home may be repossessed if you do not keep up repayments on your mortgage.