You can’t own a house without buying it first, which means signing up for one or more mortgages. You may have heard the word ‘freehold’ bandied about, but getting to grips with its meaning may be more confusing. A common question from potential homeowners is ‘what is share of freehold’? Freehold property is ownership of land and the house on that land. It’s different from a leasehold property because leaseholders only own the lease for a particular period. When this period ends, they must give up their lease or buy the property's freehold. However, there are pros and cons to both types of property ownership, so read on to find out which is best for you.
What is a leasehold property?
If you buy a leasehold property, you only have the right to live there for a set period. Although you own your home, the house itself is owned by a freeholder, who is responsible for repairs. At the end of the lease period, you have the right to extend the lease or buy the freehold of the property. But if you fail to extend your lease, the freeholder has the right to take back the property. Buying a leasehold property is a good option if you’re renting and want to save for a deposit quickly. You can then either buy the freehold or decide when to buy the freehold at the end of the lease period.
What is a freehold property?
A freehold property is one you own outright, with no ground rent, service charges etc., and no end date. You only need to pay for repairs to the building and pay council tax. The freeholder has no rights to the property; you can sell it whenever you want. You can buy a freehold property from a developer, a private seller, or a broker. You can get a freehold property if you buy a leasehold property. You can also buy a new-build house.
When to lease, when to freehold
Buying a leasehold property is a great idea if you want to get on the property ladder quickly but don’t have a large deposit saved. You’ll pay a smaller deposit on a leasehold property, and you’ll also be able to get a lower mortgage payment. However, you’ll need to be careful that your lease is long enough for you to save up for a deposit on a freehold property. You could lose your home if you fall behind on the lease payments. Also, if you’re buying a freehold property, you’ll need to ensure the area is stable for property prices. It’s also worth keeping in mind that freehold properties are more expensive than leasehold properties.
Pros of buying a leasehold house
There are various pros and cons to both options of either having a share of freehold or becoming a leaseholder. For example, being a leaseholder means getting on the property ladder quickly. Many people struggle to save for a large deposit to buy a freehold property. A leasehold property is a great way to get into the housing market without having a hefty deposit. Additionally, you don’t need a large deposit. A larger deposit is often required for buying a freehold property. But with leasehold property, you only need to pay a small deposit and regular monthly payments. Finally, you can always buy the freehold at the end of the lease. If you like the house and the area, you can buy the freehold at the end of the lease period. This means you don’t have to move, and you have a long-term commitment to the property.
Pros of buying a freehold house
Meanwhile, the benefit of having a share of freehold is that you own the entire property and don’t have to worry about the council increasing your lease payments. Furthermore, there is more security. When you own the freehold of the property, you’re responsible for everything from the roof to the gardens. This means you can call the council out whenever you want. Finally, you can sell the property whenever you want. If you buy a leasehold property and the house's value increases, you can sell it and make a profit.