Can you do equity release on leasehold flats?

Do leasehold flats qualify for equity release?

It is possible to get equity release on leasehold flats – as long as the length of time remaining on the lease meets the lender’s minimum criteria. In this article, we look at which leasehold flats qualify, and how to find a solution if at first it looks like your flat isn’t eligible.

Flats in England, Wales and Northern Ireland are often owned on a leasehold basis and will qualify for equity release if the lease is long enough. (Scotland is a different situation as leasehold is now an extremely rare form of tenure.)

In our guide to equity release on leasehold flats, we cover the following:

• How does equity release work?
• What is a leasehold flat?
• Can you get equity release on leasehold flats?
• Are there other ways to release equity on leasehold properties?
• Getting advice on leasehold equity release.

After you have read our guide to equity release on leasehold flats, you’re welcome to call us on 0808 178 3055, or request a call back and we’ll be happy to help further. Our selected advisers specialise in equity release and can advise on your property’s eligibility for a lifetime mortgage or home reversion plan.

How does equity release work?

Equity release is aimed at later life homeowners (aged 55+) who want to unlock some of their property wealth without having to sell up and move home.

The most popular form of equity release is a lifetime mortgage. This involves releasing a percentage of your home’s value as a secured loan. You still retain ownership of your property and have the same right to live there as before. 

The loan plus interest is typically paid back through the sale of your home when you pass away or move into permanent long-term care. You may be able to repay it sooner however, although this may involve early repayment charges. 

To find out how much you could borrow, check here or talk to one of our friendly consultants by calling 0808 178 3055 or request a call back.

What is a leasehold flat?

A leasehold arrangement is where you buy the flat but not the land it sits on. The land is owned by the freeholder, who sells you the flat for a set period of time but retains ownership of the land. 

You pay the freeholder (also known as a landlord) ground rent, as well as a service charge. In return, they are responsible for maintaining the building’s roof and foundations, as well as shared areas such as hallways and gardens. The freeholder could be an individual, or an organisation such as a management company, a local authority or a housing association.

A much less common arrangement is a freehold where you own the flat outright, with no separate freeholder to pay ground rent or a service charge to. Another type of property tenure is when leaseholders come together to own the freehold of the building through a residents’ management company.

Can you get equity release on leasehold flats?

Yes, you can take out equity release on a leasehold flat – as long as the property meets the lender’s criteria. Each equity release provider has their own criteria and rules regarding the type of leasehold properties they accept. 

These criteria include the following areas:

The length of the lease

Leases tend to be fixed for 99, 125 or 999 years from the time the property is built, but it can be for any length of time. The time remaining on the lease decreases each year, but leaseholders have a legal right to extend a lease.

Equity release lenders each have a minimum requirement for the number of years left on your lease. The table below shows some examples.

If you don’t have enough years remaining on your lease, you may be able to extend its length so that your flat becomes eligible for equity release. Another option might be to buy the freehold or a share of the freehold with owners of other flats in the building.

These solutions will incur some costs and legal fees, although the good news is that you may be able to cover these from some of the money you release.

You can get help and advice on these solutions from our selected equity release advisers. They can also connect you with solicitors with equity release expertise and experience to help. Please call us on 0808 178 3055, or request a call back and we will be happy to arrange an appointment for you.

The nature of the lease

Lenders will typically want to see the lease to check that it meets certain additional criteria. They will check that the lease is ‘marketable’ with no onerous clauses that could negatively affect their ability to sell the property at the end of the equity release plan. Examples could include excessive service charges or ground rents. 

The type of flat

Not all leasehold flats are the same. Some will be in a purpose-built block, some in a converted house, some above a shop or other commercial premises, and so on. 

Lenders each have their own criteria for the type of flats they will and will not accept. For example, some providers will not accept ex-local authority flats, basement flats or flats above commercial premises. Some lenders may also refuse flats in blocks above a specified number of storeys.

Please note: Information about providers’ lending criteria is correct at time of publication. Providers will have additional relevant lending criteria, for example they will typically request a survey to check that the flat is in good and saleable condition. Please contact us to talk to one of our selected advisers about your particular circumstances and eligibility for equity release on leasehold flats.

Are there other ways to release equity on leasehold properties?

If your flat is not eligible for an equity release plan, there may potentially be alternative ways to release equity from it. These might include remortgaging to release equity or taking out a retirement interest only mortgage (RIO). 

If you are under the equity release minimum age of 55, please see our article ‘How to release equity if you are under 55’ for information on some options.

Getting advice on leasehold equity release.

We hope this article has answered some of your questions about equity release on leasehold flats. For more information or advice, why not talk to one of our selected advisers? They are equity specialists who can discuss your circumstances and offer further help.

Just call us on 0808 178 3055 or request a call back and we’ll arrange a no-obligation appointment for you.

About Richard Groom. A writer with 20+ years’ experience across several sectors including financial services, Richard has a passion for writing clear and simple content on even the most complex of subjects. In his spare time, Richard loves exploring the hills and mountains of the UK on long walks with his faithful cocker spaniel. Follow Richard on LinkedIn