Question
We want to remortgage our house, but it is rented and has only 45 years left. As such, the mortgage company will not survive until it is extended beyond 70 years. Do you have any information or support on what our options are?
Darren’s answer
With 45 years left on your lease, you have reached the point where many major lenders will unfortunately refuse to lend or remortgage.
Most lenders may want the term of the lease to be much longer – often at least 70 years at completion, sometimes longer. A short lease also reduces the value of the property and can make refinancing difficult.
Your main options are:
Extension of the lease
- This is usually the most obvious solution if you want to remortgage
- For a rented home in England and Wales, eligible tenants have legal rights to extend the lease
- Recent reforms also removed the old requirement of owning the property for two years before exercising lease extension rights
- A professional valuation is usually required, however, once the lease has been extended, obtaining a mortgage or remortgage becomes much easier.
Purchase of freehold (enfranchisement)
- If you are renting a house rather than an apartment, you may have the right to buy the freehold from the landlord
- This means that you become the full owner and should not have any problems with the lease in the future
- This is generally more attractive to lenders and future buyers
Depending on the numbers involved, purchasing a freehold can sometimes be better value in the long term than simply extending the lease.
You can also ask your current lender about transferring the product. This is where a lender may allow you to take out a new rate without having to stay on the lender’s Standard Variable Rate (SVR) or remortgage to a new lender.
This won’t work in every case, but it can be a helpful short-term solution while dealing with a lease extension.
Please note that there are some specialist lenders who will consider shorter leases. However, rates are often higher, standards can be restrictive, and many still will not accept a lease as short as 45 years.
I suggest speaking to a broker who can discuss remortgage and product transfer options and specialist lenders. It is also preferable to have someone working alongside a solicitor and conveyancer who can discuss lease extensions and the costs involved.
