Owning a property can be exciting, but choosing between the property types can be a task. The most popular types of ‘freehold’ and ‘leasehold’ have their features. To some, the first one sounds beneficial while to some the latter one is more convenient. While buying a house, it is very important to keep a clear mind on the ultimate choice. A bunch of facts explaining the two can help understand what to pick while making the big purchase.
|A freehold property or house gives you 100% ownership of the property as well as the land that it stands on for whole life. There is no end to the authority on the house or property.||A leasehold property facilitates ownership for a set period. After that period gets over, the ownership transfers to the actual person who owns the land as he is the freeholder of the property.|
What is the idol duration of lease if you buy a house on leasehold?
The duration of a leasehold property is generally from a minimum of 99 years to 999 years. It depends on your priority and needs. Depending on the leasehold period, the prices vary. Usually, a lease of many years is as good as a freehold property.
For example – if your house is on the lease of 999 years, it is like owning property even after your life. Not a bad deal!! Isn’t it? Besides, you can also go for the lease of 125 years, 150 years and so on.
To be precise, in this type of ownership, the buyer needs to be very sure and clear about his decision. Otherwise, the circumstances can cause to regret a lot.
Did you know? You can buy the freehold on your leasehold property
Yes, there are legal measures to facilitate the purchase of a leasehold property by the leaseholder and own it as a freeholder. However, in the case of flats in an apartment, the transfer of leasehold to freehold is complicated. One person cannot own the land of course, to make it possible all the flat leaseholders have to buy collectively.
Comparison of freehold and leasehold in the light of features
Here is a 2-in-one comparison between the freehold and leasehold that also describes the features of both the types.
|Freehold Features||Leasehold Features|
|More expensive due to lifetime ownership||Less expensive due to a decided duration of lease|
|Own the land as well as the property||No ownership, stay only as a leaseholder|
|No rent to pay to stay in the house||Pay ground rent for the land where the property stands|
|Usually, houses are on freehold||Usually, flats are on leasehold|
|No worry of transfer of ownership||A lease equal to 999 years is as good as freehold|
|Use property in your way and make changes||Take permission from the landowner to make any change.|
Pros and Cons of a freehold property
A freehold property (like other types) comes with its plus and minus factors. To make a rational decision on home buying, read the advantages and the disadvantages of a freehold property.
The Pros – Freehold
- You act as the sole owner on the land as well as on the house. There is no need to take permission from anyone to make any changes in the house.
- It is a safer investment because of no time limit, which happens in the case of a leasehold property.
- You can sell the house whenever you want and can earn a more significant profit if the property prices take a hike.
- The property can be transferred to your family members, which gives them a feeling of security.
The Cons – Freehold
- You have a complete legal responsibility as the homeowner. If anything wrong happens, such as the fall of the building due to poor maintenance, strict action can be taken.
- All repair expenses are on you also the maintenance charges are applicable on the sole homeowner. These duties are inescapable.
- Freehold property is usually more expensive. It is the reason that people sometimes go for a leasehold property with a lengthy lease duration of more than 120 years or something like that.
Pros and Cons of a leasehold property
Now comes the turn of the leasehold houses that have their features and thus, pros and cons. A look at them can help gain a better understanding of the two sides of the coin.
The Pros – Leasehold
- You have no reason to worry about the health of the property besides the basic repair needs. Once you leave the house after the lease is over, there is no stress on how old the property has become.
- Leasehold properties are less expensive, and you need to give no additional costs until you do not use common facilities such as gym etc. While in a freehold house, such charges naturally add to the total price.
- The leasehold houses with a long lease period such as 150, 200, 300 or even maximum of 999 years is as safe as a freehold property.
The Cons – Leasehold
- You keep no control over the house, and once the lease time ends, you have to leave the place if the owner wants that.
- For every minor to significant change, you have to take the permission of the freeholder. Otherwise, there can be legal action against you.
- When it comes to mortgage, the lenders usually approve when after the tenure your lease stays for at least 30-40 years. The lender wants to play safely on the property price. Besides, for the applicants of a first time buyer mortgage for leasehold property, there may be strict affordability rules.
Now, when there are pros and cons for both freehold and leasehold, it is perhaps easier to make a final choice. A suggestion is that freehold is a better option because you get a control on the property, but if the lease period is long, a leasehold property is not a bad choice.
The conclusion is basically on you. Explore the market, do in-depth research, take suggestions, and rely on the information above. Both the ownership types have significant roles, but the best is the one that matches your needs. Right?