fbpx Mortgages and Bad Credit: How to get a mortgage with Bad Credit Read more Chevron
Arrow Arrow
Scroll to top

Remortgaging to Extend a Lease

Get Started Ask A Quick Question

Ask us a question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different types of remortgages.

Ask us a question and we'll get the best expert to help.

1 of 3
£
£
£
2 of 3
3 of 3 Send!

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: September 23, 2021

If you have a mortgage on a leasehold property, there might come a time when you need to think about extending its lease. Most experts recommend renewing your lease before it drops beneath the 80-year mark, as the value of your home could decline otherwise.

Extending a lease can be costly, but one way you might be able to raise funds to foot the bill is through a remortgage. But how do you go about this, what are your chances of being approved for additional borrowing for this purpose, and are there alternatives to consider?

In our guide to remortgaging to extend a property lease, we answer all of these questions, and you’ll find the following topics covered below…

Can you remortgage to extend the lease on a house?

Yes. Most mortgage lenders will allow you to remortgage for this purpose. At the time of writing (August 2021), there are only a few mortgage providers – such as MBS Lending and The Scottish Building Society – declining customers outright under these circumstances.

One thing to keep in mind, though, is that some of the lenders who offer remortgages for lease extension purposes might apply restrictions and caveats to the agreement, such as loan-to-value (LTV) caps and non-negotiable terms and conditions.

If you’re refinancing to release capital for renewing a lease, you’ll obviously want to avoid any lender restrictions that may impact your plans and secure the LTV ratio you need. The best way to do this is to speak to a remortgage broker who specialises in lease extensions.

What documents you’ll need

Some mortgage lenders will need to see documentary evidence detailing how long your lease will be extended by and a breakdown of what it will cost.

In addition to your leasehold documentation, you could also be asked for the following…

  • Photo ID (usually a passport or driving license)
  • Proof of address (utility bills, credit card statements etc)
  • Bank statements for the last three months
  • Your last three wage slips
  • Accounts for the last three years, if you’re looking for a self-employed mortgage (although some lenders will accept as few as 9 months)
  • Proof of any bonuses/commission
  • A copy of your latest P60

Some lenders prefer hard copies of the above but printed copies of online bank statements and other documents will usually suffice.

Are flats any different?

Extending a lease on a flat can be more difficult than it is for houses. This is because a leasehold agreement is usually necessary to cover the cost of maintenance and upkeep for communal areas. Residents are usually legally entitled to take over the lease, but this can be complicated since at least half of the flat-owners in the building need to be on board.

They would need to enter what’s known as a ‘share of freehold’ agreement which involves pooling money for co-ownership of the lease. You’d also have to share responsibility for the maintenance of the building’s communal areas and cover the costs between you.

In terms of whether you can remortgage to release equity for renewing a lease on a flat, standard lending criteria applies. Only a handful of lenders don’t offer remortgages on flats at all, but many that do have loan-to-value ratio caps, especially if it’s a new build.

Most lenders will consider between 80% and 95% LTV remortgages, but some only go up to 75% and others between 60% and 70% for this property type.

There are other lender restrictions that might come into play if you’re remortgaging a flat. For example, some mortgage providers won’t lend for flats located in high rise properties.

Should you hang fire or extend your lease now?

There are several factors you should think about before going ahead with this. Firstly, there are the government leasehold reform proposals that are in the pipeline.

The new measures will mean that…

  • Those who extend their lease can do so by 990 years
  • They will pay less for the extension, but how much less is yet to be revealed
  • Future leases will not include ground rent

This basically means that delaying your plans to remortgage and extend your lease until the new measures come in could result in a much better deal. But, on the flip side, nobody knows when the leasehold reforms will be introduced – this could be years away.

Not everyone is in a position to delay their plans until new proposals become law. Whether you should remortgage now and go ahead with the extension or wait will depend on your situation, whether you want to sell your property and how long is left on your current lease.

Other things to consider

If you’re set on extending your lease as soon as possible, whether a remortgage is the right way to raise the funds depends on a few variables. Firstly, consider whether you’re happy to pay more for your mortgage. Adding the cost of the lease extension might result in higher monthly payments, and lengthening the term to offset this could mean paying more interest overall.

Moreover, you should also factor in whether there will be any early repayment charges or fees to remortgage. If you’re still in the initial rates period of a fixed-rate agreement, there’s a good chance this will be the case, so be sure to find out how much it could add to the cost.

When comparing your remortgage options to other sources of capital or borrowing, it’s also important to find out what rates you’d qualify for and compare this to the alternatives.

With so much to weigh up, it’s highly recommended that you seek professional advice before remortgaging to pay for an extension to your leasehold agreement.

Feefo badge

Restrictions you might encounter

Leasehold homeowners who are refinancing their mortgage to fund a lease extension might encounter the restrictions listed below, depending on which lender they choose…

  • LTV caps: Some lenders will impose an LTV cap if the purpose of your remortgage is extending a lease agreement. There are lenders who won’t go higher than 75% LTV and others who draw the line at 85% for this purpose. For unencumbered properties and self-employed applicants, some mortgage providers have stricter caps than this.
  • Time remaining on lease: There are lenders who will only consider a remortgage for this purpose if a certain amount of time will be remaining on the lease when the new mortgage term ends. For example, Harpenden Building Society will only let you refinance if there will be 40 years remaining on the lease at the end of the term.
  • Remortgage and extension must be simultaneous: Not all lenders insist on this condition, but some will only approve a leasehold extension remortgage if the refinancing and lease renewal are done simultaneously with a solicitor involved. This can be a tricky process to work through with the various parties involved, especially if there is a free legals package provided by the lender as part of the remortgage deal.
  • Approval subject to solicitor and valuer comments: Some lenders will request extra solicitor and valuer scrutiny to make sure there are no unusual or onerous terms in your new lease agreement, and that you aren’t overpaying for the extension.

Not all lenders insist on these restrictions and some assess remortgage applications for lease extension purposes on a case-by-case basis, keeping an open mind on whether to approve you and what kind of deal to offer, based on the overall strength of your application.

How to remortgage to extend a leasehold agreement

Here are the steps to follow…

  • Find a valuer and a solicitor: You’ll need a valuer to estimate the cost of your lease extension and negotiate with the freeholder on your behalf. A solicitor is needed to amend the lease and update the Land Registry database. You could use a firm who provides both services or appoint a valuer and solicitor separately.
  • Negotiate the price: Your solicitor can help you negotiate a price for the lease extension with the freeholder. If you’re unable to reach an agreement, you can apply to a First-Tier Tribunal which will set the costs on behalf of both parties.
  • Arrange your remortgage: It’s a good idea to find a mortgage broker who specialises in remortgages for extra borrowing at this point. They can guide you through the remortgage process and make sure you get the best deal available.

Your remortgage broker will provide the following services for you…

  • Offer bespoke advice on whether a remortgage is in your best interest
  • Calculate your equity and tell you whether you can release enough to foot the bill
  • Advise you on whether to refinance with your current lender or find a new one
  • Help you prepare by reviewing your credit reports and documents
  • Guide you through the application process step by step
  • Negotiate with the lender to make sure you get the best rates

Your initial consultation with your remortgage broker will be free with no obligation to take things any further, so it’s a good idea to speak to one if you’re refinancing to extend a lease.

Potential alternatives to consider

Remortgaging to cover the cost of extending a leasehold agreement is just one of the potential options available to you. A mortgage broker can recommend alternatives, such as…

  • Buying the freehold: This isn’t always an option, but it could be worth enquiring with the freeholder to see if there’s room for negotiation. Once you have an idea of how much it would set you back, be sure to seek professional advice to establish whether buying the freehold is a more cost-effective option than an extension.
  • A second charge mortgage: This is a secondary mortgage you could secure against the equity in your property. It could be an alternative to remortgaging for additional borrowing if you’re unable to refinance or do not wish to.
  • Equity release: Not to be confused with remortgaging to release equity, equity release is a range of products for homeowners over 55. They allow them to access the capital in their home tax-free and the funds can be used for any legal purpose.
  • A personal loan: Depending on the amount you need to borrow, a personal loan might be an option if you want to avoid remortgaging or are unable to.
  • A Further Advance: As the name implies, this is increasing the size of your mortgage with your existing lender by borrowing additional funds from them.

After assessing your needs, personal circumstances and the situation surrounding your lease, your mortgage broker may discuss each of these options with you to establish whether any of them might be a better alternative to remortgaging.

Get matched with a remortgage expert today

If you’re planning to remortgage to release equity for extending a lease on a house or flat, professional advice is highly recommended. Releasing equity from a property should never be done lightly and there’s a lot to take on board if the funds are for a lease renewal.

Luckily there are mortgage brokers in our network who specialise in remortgages and leasehold properties. They have the knowledge and expertise to help you achieve your plans, and we’d be more than happy to introduce you to one of them for free.

Our free broker-matching will quickly assess your needs and circumstances to pair you up with the advisor who’s best positioned to help you remortgage to extend your lease. Call  0808 189 2301 or make an enquiry for a free, no-obligation chat with them today.

FAQs

How much does it cost to renew a lease?

This is calculated on a case-by-case basis and the exact amount depends on these factors…

  • How much time is left on your current lease
  • The value of your property
  • How much ground rent you pay
  • Whether you’ve made any improvements to the property
  • The cost of your legal and valuation fees (around £4,000-£5,000 is standard)

It can be more expensive to extend your lease the closer you get to 80 years remaining and it is usually more costly for higher-value properties and homes which have increased in value because of improvements made by the homeowner during the term of the previous lease.

How long can I extend my lease by?

Under the current system, most flat-owners are entitled to add 90 years to their lease for a fair market price. Home-owners have the right to extend it by 50 years, but the freeholder can potentially offer longer extensions than this at their discretion.

Can I remortgage to extend the lease on a buy-to-let property?

Yes. Most buy-to-let mortgage lenders won’t have an issue with your remortgaging for this purpose. The same restrictions and caveats for residential properties can potentially apply.

See our guide to buy-to-let remortgages for more information about how to refinance.

Ask a quick question

We can help!

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Remortgages

Ask us a question and we'll get the best expert to help.

1 of 3
£
£
£
2 of 3
3 of 3 Send!

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Maximise your chances of approval, whatever your situation. Find your perfect remortgage broker

Get the ‘YES’ you’ve been waiting for 👍

Increase your chances of approval with an expert!

Our broker matching service will match you to a real human being who’s a specialist in your circumstances – for free!

Your expert will find you the best deal that’s right for you and be with you every step of the way.

Get Started