Should I buy a leasehold or freehold property?

Posted on March 31, 2023

When purchasing your very first home, the property buying process can present a real minefield without the right guidance or support, with the jargon you encounter as a first-time purchaser leading to a lot of Googling! The terms ‘leasehold’ and ‘freehold’ are highly likely to be a part of your fact-finding search.

To save you time and effort, and to help you buy with confidence however, we’re here to reveal the key differences between leasehold and freehold properties within the UK.

What is a leasehold property?

Leasehold properties may be a dwindling property type but there was still approximately 4.6 million leasehold dwellings in England according to the latest report from the Ministry of Housing, Communities and Local Government. This means you could encounter a leasehold property or two during your search. So, what does it mean to buy leasehold?

By purchasing a leasehold property, you will buy and own the property but not the land it resides on. The land will instead be leased to you upon purchase for a set period of time (known as the ‘lease term’) giving you the right to live within the home for this duration.

When the lease expires, the right to live within the home is revoked and the ‘freeholder’ will automatically become its legal owner.

How is freehold different?

A freehold purchase sits at the opposite end of the scale. By buying a freehold property, you will own the property and the land. This ownership, and associated right to live in the property, will only end if you sell the property or pass it on.

Which should I choose?

For most purchasers, the decision between freehold and leasehold is a simple one. With this in mind, buying freehold is always the preferred option.

Leasehold properties are not only more difficult to mortgage, especially if that lease term is on the low side, i.e. less than 80 years in length. Leasehold dwellings incur additional costs. As the leaseholder, you’ll have to pay ground rent, service charges and permission fees on top of your monthly mortgage repayments and household expenses.

You will also have to obtain permission from the freeholder before making any changes to the property, regardless of the length of your lease. A leasehold property with a short lease is likely to be dramatically devalued when sold in the future too.

Discover the perks of buying a freehold property for yourself by starting your property search with us today.