← Mortgage guides

Property type

Leasehold mortgage: lease length, ground rent and service charges

Most flats in England and Wales, and some houses, are leasehold. That is normal and lenders deal with it every day. But with leasehold, the lease is part of what the lender is lending against. A short lease, a ground rent that climbs sharply, or heavy service charges can each limit the lenders willing to help. This note is general information from Property Money Limited — not advice and not a personal recommendation.

The problem

A buyer finds a flat at a good price, then discovers the lease has 72 years left, or the ground rent doubles every ten years, or the service charge is far higher than the estate agent suggested. Or an existing owner tries to remortgage and is told their lease is now too short. These are some of the most common reasons leasehold sales stall.

What lenders typically look at

• Remaining lease length. Lenders usually want a minimum number of years left on the lease, often measured at the end of the mortgage term as well as today. The minimum varies by lender. Shorter leases narrow the field and can affect value.
• The 80-year point. Under the long-standing rules, extending a lease once it drops below 80 years can cost noticeably more because of “marriage value”. The Leasehold and Freehold Reform Act 2024 includes measures to change how extensions are valued, but the timing depends on those parts coming into force. Check the current position with a conveyancer or specialist surveyor.
• Ground rent. Lenders look at the amount and how it rises. Doubling clauses, or a ground rent that is high relative to the property’s value, can be a problem. One reason is that a high ground rent can, in some circumstances, risk the lease being treated as an assured tenancy, which could give the freeholder stronger powers if rent goes unpaid.
• Service charges. Lenders may count service charges in affordability, as they are a regular commitment. Very high charges, or large planned works, can reduce how much you can borrow.
• Major works and disputes. Big upcoming bills, disputes with the freeholder, or uncertainty about building safety work can all lead to extra questions. See new build, ex-council and cladding.
• Lease terms. Unusual restrictions — on subletting, alterations or who can occupy — can matter, especially for buy-to-let.

Ground rent: what changed in 2022

For most new long residential leases in England and Wales granted from 30 June 2022, the Leasehold Reform (Ground Rent) Act 2022 limits ground rent to a “peppercorn” — effectively zero. That does not change existing leases granted before then, so many older leases still carry ground rent, some with escalation clauses that lenders look at closely.

Paths that often help

• Extend the lease before or during the sale. Qualifying leaseholders can usually apply to extend under statute; some freeholders also agree informal extensions. Sellers can sometimes start the statutory process and assign the benefit to the buyer. Your conveyancer can explain the options.
• Vary the ground rent. Some freeholders agree a deed of variation to remove or change an onerous ground rent clause.
• Choose a lender with suitable criteria. Lease length and ground rent policies differ, so a case that one lender refuses may fit another.
• Budget for the real service charge. Ask for recent service charge accounts and any reserve fund or major works plans. Then test the full monthly cost — mortgage plus charges — in the mortgage calculator.
• Consider buying the freehold. Where leaseholders in a building can buy the freehold together, that can solve lease and ground rent problems at once, though it takes time and cost.

Problem with your lease, ground rent or service charge? Send us the facts — a few lines is enough.

Mortgagability in plain terms

Mortgagability here means: will a lender accept this lease — its length, ground rent terms and service charges — as security, and do the charges still leave the loan affordable for you? The word “leasehold” is not the issue. The terms inside the lease usually are.

Remortgaging a leasehold flat

Existing owners are sometimes caught out on a remortgage rather than a purchase. A lease that was comfortably long when you bought has been ticking down ever since, and a new lender will look at the years left now and at the end of the new term. If you are close to a lender’s minimum, or near the 80-year point, it can make sense to look at extending before your current deal ends rather than after. Your existing lender may offer a product transfer without a new valuation, which can help in the short term, but it does not fix the lease, and the problem will come back when you next sell or move lender.

Common mix-ups

“It’s 99 years, that’s fine” — but 99 years from when? The years remaining today, and at the end of your mortgage, are what lenders look at.

Service charges are not fixed. They can rise, and large one-off bills for major works may be added. Check the accounts and the planned works before you buy.

Shared ownership is also usually leasehold, with its own lender criteria. It is a different product from those covered here.

Buying a leasehold home with a high service charge means a larger fixed monthly cost. If your income stopped, could those bills still be met? The protection gap analyser is an optional illustrative check only.

Leasehold mortgage: common questions

Next step

Have the remaining lease length, the ground rent and how it changes, the annual service charge and any planned works to hand, plus your income and deposit. That gives a clear view of which lenders are worth approaching and whether the lease needs work first.