Is freehold a good idea?
What is freehold?
The owner of a freehold property owns both the property and the land that it sits on. Houses tend to have this since it gives the owner control of both the lawn/driveway, as well as the structure itself.
The freehold land of freehold flats is split horizontally, which means that freehold titles are stacked on top of one another. Each flat then receives a freehold title.
How much does it cost?
The cost of freehold flats can vary greatly depending on the location, size, and area. The purchase of a freehold flat can be cheaper than the purchase of a leasehold flat in some cases.
A freehold flat can be purchased at auction, but in almost all cases, there is a problem with the building’s freehold title. Having an expert examine your potential purchase before making your purchase will be worthwhile if this is the case.
Advantages of owning a freehold
One of the biggest advantages of buying a freehold flat is having your own building and land. Additionally, it allows you to make changes to your exterior without getting permission from a landlord or property manager.
In addition to not paying ground rent, service charges or other fees associated with leaseholds or renting, a freehold flat is also cheaper to buy. This can help you save money when it comes to monthly expenses and bills, especially in highly desired areas like cities or town centres.
However, there are many different responsibilities of a freeholder and some of these aren’t advantages.
Disadvantages of owning a freehold
Purchasing a freehold apartment can be expensive, which is one of the major risks. Buying a freehold apartment should be handled by a lawyer or professional to make sure you are getting your money’s worth. You may also have to pay maintenance fees if your freehold title is not in good condition.
Another common problem is that freehold flats are simply unmortgageable. Since freehold flats are so expensive, it is not possible to get a large enough mortgage to cover the costs.
In addition, lenders and banks often refuse to lend to buyers of freehold flats altogether. In addition to the high price, freehold flats are generally viewed as risky investments.
Owners of freehold flats also face legal problems since there is often no clear agreement on who pays for what repairs, leaving the freehold owner dependent on neighbours. When the flat is purchased, it’s difficult to determine who does what and how much each should pay, and there’s no clear legal obligation or agreement, so no decision is legally backed.
Things to remember when buying a freehold
Besides considering all the positives and disadvantages of freehold flats, you should also consider how much you can afford. In addition to buying a freehold flat, you may also consider purchasing a leasehold flat or joining a shared freehold.
Freehold flats have the biggest risk due to the unknown future maintenance and repair costs. It is important to take equity out of your existing home if you are planning to buy a freehold flat.
When it comes down to deciding who should pay for what when you have equity in your current house and a mortgage on another property, it can be extremely difficult to decide who should pay for what. Getting legal advice from your solicitor is essential if you decide to split equity between two properties.
It is important to factor future costs into your monthly budget if you are considering buying a freehold flat that requires ongoing maintenance or needs to be repaired in the future. As a result, you can ensure you have enough money to pay for ongoing repairs and keep your monthly living costs within your budget.
Alternative to freehold
If purchasing a freehold flat isn’t doable. The next best option might be to purchase a leasehold flat. Unlike freehold flats, leasehold flats have a lease rather than a title of ownership. The ownership of a leasehold flat usually reverts to the freeholder after 99 years of the lease. The flat will need to be bought again, or it will revert to freehold. There are also lease terms of 999 years and premium leases available. Most buyers will encounter a regular flat lease with a 99-year term.
Advantages of owning a leasehold
The biggest advantage of a leasehold flat is the cost of one is much lower than a freehold flat. This makes it more affordable if you’re unable to afford a freehold flat.
To cover the costs of repairs made by the leaseholder, leaseholders must pay a maintenance fee. The fees associated with maintaining and looking after a freehold flat are likely to be significantly lower.
You can sublet your property as a leaseholder, which could provide you with an additional source of income. Leaseholds don’t give you unlimited freedom, but they allow you more flexibility than renting would.
No matter what you’ll decide, we recommend you to use a property management platform to manage your real estate assets