Mortgages for flats

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

Can you get a mortgage for a flat?

Yes, it’s possible to get a mortgage for a flat, but you may find that you have fewer providers prepared to lend to you depending on the type of flat you’re purchasing.

This could be because the building that houses your flat has been constructed from an unusual material. In fact, if it isn’t bricks and mortar, you may have to look for a specialist mortgage lender.

It will also depend on whether the flat is leasehold or freehold. You may struggle to find a mortgage for a freehold flat as it’s quite niche.

Apart from potentially needing to seek out a specialist lender, mortgages for flats work in the same way as mortgages for houses.

You’ll be required to meet the eligibility criteria set out for the loan, which includes passing affordability checks and having a good credit score. Basically, your lender will investigate whether you’re likely to make your payments in full and on time each month.

Two people moving furniture into newly purchased flat

Freehold or leasehold?

You buy property on a freehold or leasehold basis. Flats tend to be leasehold, whereas houses are generally freehold.

Freehold means that you own the physical property and the land it stands on.

Leasehold is when you own the property, but the land it occupies belongs to someone else (freeholder). The lease will be a certain length, after which, if you haven’t extended it, ownership of your property will revert back to the freeholder. This could be a private landlord or a property management company if you live in a block of flats.

The freeholder of the building that contains your flat is responsible for maintenance of communal areas, however you’ll likely be charged ground rent to pay towards this.

You may be able to buy a share of the freehold, this is where you and the other flat owners in the building purchase the freehold together. You’ll then be responsible collectively for maintenance of the building and any bills or charges that must be paid.

Why are freehold flats more difficult to get a mortgage on?

The reason why it’s harder to find a mortgage lender is because there isn’t a third party responsible for maintenance of the building that contains your flat.

In theory, if you share the freehold with other flat owners in the building, you should look after the building together.

In reality, it can cause problems if people don’t want to contribute towards an issue that doesn’t affect their property directly, or there’s a disagreement over price. This means the building could be poorly maintained and problems could occur, like damp, faulty wiring or subsidence.

This is seen as risky to the lender, so they’re less likely to offer mortgages for freehold flats.

How the type of flat you’re buying can affect your mortgage options

There’s a variety of different flat options available and depending on which you choose, you may have to search for a specialist mortgage lender.

Above shops

Flats located above a commercial property may have limited mortgage options. This is because they can lose their value and are less desirable to potential buyers, so lenders will be worried they may not get their money back.

It will depend on the type of business and its opening hours though. For instance, it may be easier to find a lender for a flat above a small shop that closes at 5pm, compared to one above a late-night takeaway.

Typically, you’ll have to pay a larger deposit for a flat above a shop.

Coach house

A coach house is a flat situated above a garage or row of garages, which usually belong to the surrounding houses.

They tend to be freehold but can be easier to find a mortgage for because the freehold isn’t shared with other apartments.

Maisonettes

Maisonettes have two storeys and their own separate entrance within a larger building. Although they do have more than one floor, they’re classed as apartments.

How easy the maisonette is to mortgage will depend on whether it’s freehold or leasehold. As with most flats, a freehold property will make it more difficult to find a mortgage.

Leasehold maisonettes are more common and can be easier to get a mortgage for.

Maisonettes

Maisonettes have two storeys and their own separate entrance within a larger building. Although they do have more than one floor, they’re classed as apartments.

How easy the maisonette is to mortgage will depend on whether it’s freehold or leasehold. As with most flats, a freehold property will make it more difficult to find a mortgage.

Leasehold maisonettes are more common and can be easier to get a mortgage for.

New-build flats

Deposits for a new-build flat are usually at least 20% of the property’s value, which gives a loan-to-value ratio (LTV) of 80%.

Compared to standard properties or even new-build houses (usually at least a 15% deposit), this is quite high.

High risers

What is classed as a high-rise apartment building will depend on the mortgage provider. Generally, it’s a block of flats with more than seven storeys.

If your flat is in a high-rise building, your options will be limited, and you may have to find a specialist provider.

It may be easier to find a willing lender if you’re located in London, but how tall the building is and what it has been constructed from will play a big part in whether you’ll be offered a mortgage.

The lender will even take into account whether the block of flats has lifts or exterior walkways to access your flat.

How to get a mortgage for a flat

It’s much the same as when you apply for a mortgage for a house, you’ll be required to pass the affordability check of the lender before you’re offered a mortgage.

This will assess your income and whether you’d be able to comfortably afford your repayments. Your credit history will also be looked at, as well as the property you’re looking to buy.

Depending on the specifics of the flat, you may have a limited selection of mortgage providers available to you. If it is of non-standard construction or located in a high-rise block, you may have to look for a specialist provider, or use a mortgage broker with experience in this area.

Always compare your options, even if they’re limited, to make sure you’re getting the right deal for you.

How much deposit will I need for a mortgage on a flat?

It’s likely that you’ll need a higher deposit for a flat than a standard house.

A deposit of at least 15% is typical for a flat, compared to 10% on a house.

Of course, this could be even higher depending on the specifics of the flat. For example, if the surrounding building is made of concrete.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

PLEASE NOTE: THE FCA DOES NOT REGULATE MOST BUY TO LET MORTGAGES

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