Mortgages for flats

Compare mortgages for leasehold and share-of-freehold flats with Mojo Mortgages[1]

Block of flats

Can you get a mortgage for a flat?

Whether leasehold or share of freehold, it’s possible to mortgage a flat, just as you would a house.

But there’s usually a few more considerations around making sure a flat is suitable for a mortgage and criteria will vary from lender to lender.

Affordability and mortgages for flats

When buying a flat, there are a few things that can affect your mortgage affordability.

Your lender will want to know what your ground rent, service and maintenance charges will be and will adjust your mortgage offer accordingly.

Be aware that; with new-build flats in particular, service charges can be quite high and affect affordability.

Some lenders also have a maximum loan-to-value (LTV) that they'll lend on flats. Again, this may be lower for new-build flats.

For example, they might lend up to 90% on houses, but only up to 85% on flats and up to 80% on new-build flats.

The value of the property will be evaluated by someone appointed by the mortgage provider. They'll take into account the total number of flats in the apartment block before deciding on their offer.

Freehold or leasehold?

One of the main factors that mortgage providers consider is whether your flat is a freehold or leasehold property, as this can have an impact on the value and the mortgage offer.

Leasehold flats

A flat described as leasehold means you're provided with a lease from the owner - known as the 'freeholder' - for a certain period.

When the lease is up, the freeholder effectively owns the property again.

But it rarely comes to this, as the leaseholder normally takes steps to extend the lease long before it runs out.

If your flat is leasehold then you'll have a contract with the freeholder. They will be responsible for the upkeep of shared parts of the building, like corridors and stairwells.

In return, leaseholders normally have to pay maintenance or service charges and ground rent to the freeholder, on top of mortgage repayments.

It's usually possible to extend your leasehold or buy a share of the freehold, but you'll pay for the privilege.

Length of lease

The length of the lease will be questioned by the mortgage provider. If it's below 83 years it could be difficult to find a mortgage. If it's less than 60 years it's often impossible.

The same applies if you're buying property at auction. Always read the legal pack carefully because, if you're lumped with a short lease, it could make it more difficult or even impossible to find a mortgage.

If you want to buy a property with a short lease, a mortgage adviser can help you find a lender who might consider your application.[1]

The value of long-term leases stays fairly stable, whereas the value of short-term leases can drop rapidly.

Even if you can find a lender for a flat with a shorter lease, it can be extremely costly to extend the lease once you've moved in.

You may be able to negotiate with the seller to extend the lease as part of the purchase. This may make the property a more acceptable prospect to a lender.

Absent freeholders

Sometimes it becomes apparent during the conveyancing process that the freeholder can't be traced, usually because they've died or moved away. This is known as an 'absent freeholder' and can cause problems when buying a flat.

Sometimes, an indemnity insurance policy can help an absent freeholder sale to complete. The other alternative is the lengthy process of the seller applying for a court order to allow them and the other leaseholders buy the freehold.

Freehold flats

A freehold property is when you own the building and the land it occupies outright. You'll be named as the freeholder in the Land Registry.

Houses tend to be freehold, but flats and apartments will are likely to be leasehold. However, some freehold flats do exist, just as some leasehold houses do, and both can be more difficult to find a mortgage for.

It's extremely important to check what the situation is before you sign on the dotted line. It could mean the difference between being accepted for a mortgage or not.

You may find that the flat you want to buy holds the entire freehold for a small block or converted house. It should be possible to get a mortgage, as long as the other flats each have a leasehold agreement with you as their freeholder.

Flats with share of freehold

It may be possible for you and the other leaseholders who own the rest of the flats in the building to come together and purchase the freehold from the current freeholder.

This would essentially this would mean that you own a share of the freehold along with the other flat owners.

If you have a share of freehold flat, repairs on structural problems within the apartment building have to be coordinated and funded by residents.

This also means that you're responsible for the building's insurance and upkeep of communal areas.

There'll usually be a contract which effectively contains the same agreements as the previous leasehold one, so this shouldn't be too much of a problem.

Mortgages and different types of flats

The type of flat could have an effect on your mortgage application. While conversion flats and small, purpose-built blocks are relatively straightforward to mortgage, lenders will be more wary of certain types of flats and apartments.

Mortgages on high-rise flats

Whether your property is suitable for a mortgage could depend on the number of storeys it has. Some lenders won't lend on flats situated in a building with more than a certain number of storeys - typically five. That's even if the one you want to buy is located on the lower floors.

Mortgages for flats above shops

If the flat you're looking at is above a commercial property, you may find it more difficult to get a mortgage. The lender will consider the business below the flat as this'll influence whether you're offered a mortgage or not, and sometimes the maximum loan-to-value available.

Key features a lender could check for include:

  • Noisy commercial activities located nearby, especially if it takes place during unsociable hours, for example if the flat is above a nightclub or bar
  • Pungent smells emanating from a nearby business, for example a restaurant, cafe or takeaway on the floor below
  • Unsatisfactory access to the flat, for example if you have to go through the business downstairs to get into your home

This could even apply if your flat is close to a commercial establishment and not directly above it.

Mortgages for coach house flats

A coach house flat is an apartment built on top of a garage or garages, some of which may belong to nearby properties.

Coach house flats are often freehold properties and the only flat in a block. Normally, flats with individual freeholds within a shared block are difficult or impossible to mortgage, but coach houses are an exception as they hold the only freehold in a block.

Mortgages for maisonettes and flats with individual freeholds

A maisonette is a self-contained flat within a larger building. It's usually spread out over two floors and often has a separate entrance from the rest of the property.

Maisonettes sometimes have their own individual freehold, even if they're in a block with other maisonettes. Unfortunately, it's not usually possible to get a mortgage if you're buying a maisonette of this sort.

Occasionally, flats have their own individual freehold, despite being located in a block. This is known as a 'flying freehold' and, again, these are likely to be an unmortgageable prospect.

Conveyancing for flats

Be aware that, when you're buying a flat, you'll probably need to budget a little more for conveyancing than you would with a house.

That's because the conveyancer has extra work to do examining freehold and leasehold agreements, which is likely to involve extra charges.

By Abbie Laughton-Coles