Leasehold vs Freehold: Which Is Better for Buy-to-Let Landlords?

When investing in a rental property, one key decision is whether to purchase a leasehold or freehold buy-to-let. Both ownership structures have pros and cons, and understanding these differences can help landlords make informed decisions.

What Is the Difference Between Leasehold and Freehold?

Leasehold Properties

A leasehold buy-to-let means you own the property for a fixed period but not the land it sits on. Instead, the land is owned by a freeholder, and you may need to pay ground rent and service charges.

Pros of Leasehold Buy-to-Let:

• Lower upfront cost compared to freehold

• Often includes maintenance of communal areas

• Can be a good option for flats and apartments

Cons of Leasehold Buy-to-Let:

• Lease terms can expire and may need extending

• Ground rent and service charges can increase over time

• Freeholder restrictions may limit property modifications

Freehold Properties

A freehold buy-to-let means you own both the property and the land outright, with no time restrictions or lease agreements.

Pros of Freehold Buy-to-Let:

• Full ownership with no lease expiry concerns

• No ground rent or service charges

• Greater control over property management

Cons of Freehold Buy-to-Let:

• Higher upfront cost

• Maintenance responsibilities fall entirely on the owner

Leasehold vs Freehold: Which Is Better for Buy-to-Let Investors?

The choice between leasehold or freehold buy-to-let depends on several factors, including your investment strategy, property type, and financial goals.

When Leasehold Is a Good Option:

• Investing in city-centre flats with high rental demand

• Preferring lower initial costs with shared maintenance responsibilities

• Willing to account for lease-related expenses in profitability calculations

When Freehold Is a Better Option:

• Investing in houses where long-term ownership is key

• Avoiding additional costs like ground rent and service charges

• Seeking full control over property management

Mortgage Considerations for Leasehold vs Freehold Buy-to-Let

Lenders often have different mortgage criteria for leasehold and freehold buy-to-let properties. Leasehold properties typically require a lease term of at least 70 years to secure mortgage approval. If you’re considering financing a buy-to-let investment, use our Mortgage Affordability Calculator to assess your borrowing potential.

Final Thoughts: Choosing the Right Buy-to-Let Property

Whether leasehold or freehold buy-to-let is better depends on your long-term investment plans and financial circumstances. Carefully assess the property type, costs, and financing options before making a decision. If you need expert guidance, our team at Possible Mortgages can help. Visit our Contact Us page to speak with a mortgage specialist today.

For more useful insights, check out our Knowledge Hub.

Your property may be repossessed if you do not keep up repayments on your mortgage. Not all Buy to Let Mortgages are regulated by The Financial Conduct Authority.