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Second charge mortgages from 5.1% APRC. Second charge mortgage representative example (if you choose to add fees to the loan). Assumed borrowing of £29,000 over 139 months, plus a broker fee of £2,850 and lender fee of £367.50 would result in monthly repayments of £406.28, the borrowing rate is 8.6%, the APRC is 11.3% (variable), total charge for credit would be £24,254.73 and the total amount payable would be £56,472.23. Freedom Finance is a leading credit broker and not a lender. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

What to know about purchase freehold loans

Purchasing the freehold means that:

  • You no longer have to pay service charges or ground rent.
  • You can extend the lease for 999 years free of charge (although there will be legal fees to action this).
  • You have the freedom to choose a more competitively priced maintenance and insurance deal.
  • You may benefit from a 1% increase to your property, as well as making your home more desirable to potential buyers.

However, you must also consider:

  • The large initial cost to purchase the freehold, for which you may need a loan.
  • The lengthy freehold purchase process, which usually lasts a year but could be longer if the current freeholder is uncooperative.
  • That the lease will remain the same, so ask a solicitor to check this over.
  • That a freehold company must be set up between the freeholders and as a result the insurance, maintenance and account’s responsibilities must be shared and agreed upon, with your neighbours.

How much does it cost to purchase a freehold?

Usually, the cost of purchasing a freehold equates to the cost of extending the lease for 90 years. This cost can increase if the lease term drops to 80 years or less. In addition to the cost of the freehold, the following fees will also need to be paid:

  • Stamp duty
  • Valuation fees
  • The freeholder’s fees
  • Legal fees

Finance options to purchase freehold

Some lenders will agree to extend your mortgage for the purpose of purchasing the freehold, as long as the equity available will cover the purchase.

An advantage of this is that the interest rates may be more favourable than a loan, although more would need to be paid overall.

Another option is to check your eligibility with a second charge mortgage attached to your home. This type of lending lowers the risk to a lender, so a borrower can benefit from large amounts, potentially low interest rates and lengthy repayment terms.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

How to buy a freehold:

Discuss the freehold with your neighbours

At least 50% of the flats within the building must agree to take part, and all leasehold costs must continue until the freehold has been purchased.

Appoint a solicitor

A specialist in leasehold law can be found via The Leasehold Advisory Service. These solicitors can serve the initial notice, negotiate the price on your behalf and amend the lease if necessary, as well as offering legal advice.

Hire a chartered surveyor

Chartered surveyors can also be found via The Leasehold Advisory Service, and are hired to value the freehold based on experience within the area.

Set up a company

Advice on setting up your company can be sought from Companies House as well as from your solicitor.

Agree on a price

If a fair price cannot be agreed upon, you can ask the Leasehold Valuation Tribunal to arbitrarily decide the cost for you. This application to the LVT must be made within 6 months of when the freeholder’s counter notice was due.

Time is of the essence when deciding to purchase a freehold, and as a result it is imperative to use only quality applications for credit. This is why the credit footprint-free search tool from Freedom Finance can be so useful, because you are presented with individually tailored accurate quotes matching your circumstances when checking your eligibility for a loan, protecting your credit score.