Updated: January 17, 2022

Getting a Mortgage on an Apartment

Looking to see if you can get an apartment mortgage? There are lots of options out there! Find out the easiest way to get one in our in-depth guide.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: January 17, 2022

An apartment – or flat as we Brits call them – is a self-contained residential property that only makes up part of a building. This is obviously different to a house, which counts as its own building, and makes things a little more complicated when applying for a mortgage.

By following this guide you’ll have a better understanding of how to get a mortgage for the type of apartment you want to buy, what lenders are looking for and where to look for any guidance you might need.

Can you get a mortgage on an apartment?

Yes, of course you can. The key factors that influence someone’s chances of getting a mortgage – size of your deposit, affordability (income/outgoings) and credit record – are all just as relevant when buying an apartment as they are for buying a house.

There are several things a lender will be concerned about when you apply for a mortgage on an apartment – the main implication, typically, would be whether it’s classed as a freehold or leasehold.

It’s important to understand what this means at the outset for your property before making an application.

Is the apartment a freehold or a leasehold?

A freehold is when you own the property and the land it sits on. A leasehold is when you own a lease to live in a property for a fixed period of time, but not the land it sits on or the rest of the building it’s in.

Most houses are classed as freehold. Most apartments are sold on a leaseholder basis, with the freehold usually held by whoever built the property or a third party who now owns the whole building.

Leasehold apartments

The main reason it can be difficult to get a mortgage for some apartments is because of the problems caused by how long is left on the leasehold at the point of purchase – this is pretty much the first thing a lender will want to know when you submit a mortgage application.

A leasehold term can range anywhere from 99 up to 999 years. If there’s 100 years or more left on a lease, you should be in the clear. But a lease of 80 years or less is expensive to extend.

After this point, you’ll be expected to pay half of the property’s ‘marriage value’ to the freeholder on top of the usual cost of extending the lease. Marriage value is the extra value added to the property when you extend the lease.

Because of this added cost, the value of properties with short leases can reduce rapidly and mortgages are difficult to come by. One option is to ask the seller to extend the lease as part of the purchase.

Freehold apartments

While freehold flats are rare, they do exist. For a block of freehold flats, the ‘land’ will be split horizontally, with each freehold stacked on top of the other. This can make it difficult to agree who’s responsible for repairs on the main structure of the building or communal areas.

Persistent problems with their upkeep can reduce the value of these types of property. For this reason, some lenders are often hesitant to offer mortgages. Again, this is where the advice of an experienced mortgage broker can make all the difference if you want to pursue a purchase.

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Affordability issues

Lenders will also be concerned about how much your ground rent and service charges are, partially because they will impact how much you can afford to pay monthly on a mortgage. Your ground rent is the sum you pay to the freeholder, while services charges are paid to either the freeholder or a service management company to cover the upkeep of common areas of the building.

These costs are growing year by year, and many leaseholders are finding it difficult to remortgage or sell their property because of them.

‘Share of freehold’ apartments

One solution to some of the problems facing leaseholders is to come together with those who own the rest of the flats in the building to buy the freehold from the current owner.

This creates a ‘share of freehold’ agreement between you and the other apartment owners.

Be aware that this will mean you will all be responsible for coordinating and funding any structural repairs on the apartment building and looking after communal areas. However, you will have more visibility of the costs of doing so. These agreements are particularly common in London where larger houses have been converted into separate apartments.

Other issues you might face

Other lender restrictions you might come across include the following…

  • Maximum number of floors: Some mortgage lenders won’t offer finance for apartment buildings over a certain number of storeys high. A specialist lender is often called for if the property is a high rise.
  • Non-standard construction: If the flat you’re buying was built from materials besides bricks and mortar, your property might be classed as ‘non-standard’ construction, which means it can be more difficult to get a mortgage.
  • Cladding: Properties with potentially unsafe cladding have been more difficult to get a mortgage on since the Grenfell Tower disaster in 2017. To secure mortgage approval, you’ll need an ESW1 form, but these can be difficult to obtain. You can read more about this over on our sister website, Online Mortgage Advisor.

What type of mortgage do you need?

The type of mortgage you need obviously depends on what you want to do with the apartment you’re buying.

Residential mortgage

If you’re planning to live in the apartment yourself or allow family to do so rent-free, you need a residential mortgage. The criteria for residential mortgages for apartments are similar to those for any other type of property.

However, most lenders offer a slightly lower loan-to-value ratio on apartments than they do on houses. This is the percentage of the property that you owe the bank, compared to the amount that you own. Put simply, this means that you will often have to pay a larger deposit on a flat than you would a house.

Nationwide, for example, will only allow a maximum LTV of 85% on new build flats specifically. Virgin Money goes even lower for new builds (75%), but higher for second hand flats (85%).

Buy to let mortgage

You’ll need a buy-to-let mortgage if you’re planning to rent out the apartment you’re buying.

The basic criteria for buy-to-let mortgages are:

  • You want to invest in houses or flats
  • You already own your own home (you’re allowed to have a residential mortgage for it)
  • You have an acceptable credit record
  • You earn over £25,000 a year (only some lenders have this requirement)
  • You’re under a certain age
  • Some lenders have an upper limit on how old you can be when your mortgage ends.
    • This is usually between 70 and 75. For example, if you take out a 25 year mortgage at 45, you’ll be 70 when it ends – which is fine for most lenders.

You will often also have to show evidence that your rental payments will cover at least 125-130% of your mortgage repayments.

Commercial mortgages – Can you get a mortgage for an apartment building?

Yes, you can! If you’re looking to buy a purpose-built block of flats, this will usually be classed as a multi-unit freehold block. A MUFB is a building with multiple residential units that’s held under one freehold title, rather than multiple leases. Interest rates are normally higher, and many lenders only offer an LTV of around 75%.

Your best bet is definitely speaking to a mortgage broker here, who will be able to find you a specialist commercial lender.

How a mortgage broker can help you get an apartment mortgage

There are a lot of variables to consider when you’re looking at an apartment mortgage. Speaking to an independent mortgage broker will allow you to get impartial advice on your unique situation.

Mortgage brokers also boost your chance of getting approval as they’ll know who the best lenders are and which will be most likely to look more favourably on your application.

Our advisor-matching service can quickly assess your needs and pair you with a broker who has the right knowledge and expertise to solve your problems. If you give us a call on 0808 189 0463 or get in touch, we’ll arrange for an expert to contact you straight away.

Ask a quick question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different Property Types. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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