When should you extend a lease and how much would it cost?
A Lease lasts for a finite period of time and any lease with 70 years or less to run is classed as a Short Lease.
Essentially, as the unexpired period reduces, so does the value to the leaseholder, whilst the value to the freeholder increases. This is why it's best to extend a Short Lease sooner, rather than later and you should be mindful of the following points.
The cost of extending a lease is a balance between the value of its location and the length of time it has left. The best advice is to look at your own circumstances when deciding.
When a lease has less than 65 years left, you are looking to add approximately 1% of the value of the property to the cost of extending for each year delayed. In other words, a home worth £250,000 can end up with an extra £2,500 of cost per year to extend the lease.
The other difficulty with short leases is that mortgage lenders don’t like them! They reduce the value of the property making the loan seem riskier. For anyone in a shared property, an option is to club together to buy out the freehold owner or to press on alone if not.
The process of buying a freehold is complex and needs legal advice. But there is a procedure for establishing how much it will cost. Whatever you decide, now is certainly a good time to think about the lease you have, or the one you are tempted to buy.
BW Residential Ltd
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