Freehold Flat Mortgages

If you’re considering buying a flat, the most important thing to consider is whether it’s freehold or leasehold.

Of the two, freehold flats are more scarce and getting a mortgage for one is even more so. But, that doesn’t mean it’s impossible – far from it!

This guide will tell you everything you need to know about getting a mortgage on a freehold flat, what you need to be aware of, and how a specialist broker can help make the whole process much more straightforward.

What is a freehold flat?

A freehold flat has no leasehold title, and isn’t tied to the building it’s situated in or any other property owners – it’s an entirely separate entity.

This means there is no external body responsible for the property or the building as a whole, and as such, there is no need to pay ground rent or service charges.

Instead, your responsibility extends to the boundary of your flat, and neither you nor anyone else in your block will be obliged to deal with any maintenance issues that could arise.

This is in stark contrast to leasehold flats, which are much more widely available (except in Scotland, where freeholds are more common).

In this scenario, someone owns the freehold of the entire building, and the individual flats are leased to separate owners. These owners usually pay extra to ensure the maintenance of the building and any communal spaces.

Freehold flats may initially sound appealing, particularly as there are no service charges to pay. Still, it could actually make the process of homeownership more difficult, especially when it comes to securing a mortgage.

Can you get a freehold flat mortgage?

Technically, yes, but it’s not straightforward. Freehold flat mortgages are almost impossible to come by, and lenders often do not consider this kind of property good security.

There are a few reasons for this:

• There’s no legal obligation for any flat owners to maintain the structure of the building.
• You’re reliant on your neighbours to share the cost of any necessary repair or remediation works, but they’re under no obligation to pay.
• Individual flat owners aren’t required to keep their property in good condition.
• Agreements can be made between building occupants, but there’s no guarantee that any future freeholder will enter into them.
• Disputes about who’s responsible for what are a very real possibility – if your ceiling is someone else’s floor and there’s a leak, who’s responsible for fixing it?

Because there’s no clear division of responsibility in a freehold flat building, most lenders are understandably wary. This reduces the value of the property, the building could easily fall into disrepair, and the flat is less saleable. Ultimately, if issues arise, the lender risks losing out.

You may be able to find a mainstream lender, but this will be on a case-by-case basis, and you’ll need to pass all other eligibility criteria easily. This means it’d be worth speaking to a specialist broker first who can approach the right providers on your behalf.

How a broker can help

A specialist broker can help you secure a freehold flat mortgage in two key ways:

• They can help you identify the lenders and the best rates available. Given that freehold flat mortgage lenders are few and far between, it makes sense to have an expert broker on your side to source them. They’ll know exactly who to approach to save you time and reduce the possibility of a straight-up rejection, and will be able to negotiate on your behalf to secure the best rates.
• They can help you avoid any pitfalls during the application process. The complexity of a freehold flat arrangement means having someone who’s experienced in this kind of mortgage application can be invaluable, as they’ll know exactly what you need to do – and any potential hoops you need to jump through – to boost your chances of success.

If you get in touch, we can arrange for an advisor we work with, who has experience in arranging mortgages for this type of property, to contact you directly.

Who will lend on freehold flats?

Very few mainstream lenders will offer mortgages on a freehold flat. Even if they do, they’ll often have stringent criteria, such as:

• Some lenders will only offer this kind of mortgage where the security (or freehold) comprises the whole building.
• Acceptable loan-to-value (LTV) ratios are often lower, particularly for new builds, with some lenders offering maximum LTVs of 75% or 85%.

HSBC, Nationwide, and NatWest are the only mainstream lenders currently considering lending on true freehold flats, but this will always depend on your circumstances and will be subject to strict criteria.

The remaining few lenders in this space are smaller providers, and it’s advisable to speak to a specialist broker beforehand in all cases.

Eligibility requirements

Eligibility criteria can be stricter for this kind of mortgage.

Here are a few things you’ll need to bear in mind.

Other types of freehold flat

True freehold flats are very different to flats that share a freehold. Known as ‘share of freehold’ flats, owners share both the lease and the freehold of the entire building in which they’re situated, making the flat more valuable as the owner is interested in the whole building.

There can also be arrangements where a house has been converted into flats, with the owner leasing the other flats out but retaining a separate part of the building for themselves (they may have the upper floor, but the lower floors are on a long lease, for example).

As the freeholder of the building, their dwelling has no lease and can sometimes be confused as a freehold flat, but on closer inspection, it will normally be mortgageable.

Get matched with a specialist freehold mortgage broker

Freehold flat mortgages are anything but standard, and such a complex purchase means you’ll need an expert on your side to streamline the process. Our unique broker matching service can help you find that expert.

We’ll connect you with an advisor who specialises in freehold flat mortgages. Thanks to their network of lender contacts and in-depth knowledge of the sector, they’ll give you the best possible chance of securing the finance you need.

It’s free and there’s no obligation, so call 0330 822 0505 today or make an enquiry to get started.