In this blog post, we will delve into the concept of freehold home ownership, particularly for first-time buyers.
What is the meaning of freehold ownership?
Freehold home ownership means that you own the property and the land it sits on for as long you want. You own the title to the property with absolute possession, which means that you hold the highest form of property ownership.
What does freehold ownership entail?
Generally speaking you'll find that houses are sold as freehold (there are exceptions) but usually when you purchase the freehold, you are usually buying a house rather than a flat.
In order to purchase the freehold you would need to save for a deposit, which could be anything between 10-15% of the purchase price and you would apply for a mortgage in order to fund the rest (unless you are a cash buyer). If you are opting for a mortgage then before approaching an estate agent, it would be worth speaking to a mortgage broker so that you can get a mortgage in principal, this will show that you are a serious buyer.
When you purchase a property as a freeholder you are responsible for any repairs and maintenance of the property wholly. So, if you need a new roof for example, you will need to make that arrangement and pay for it.
What are the advantages of freehold ownership?
You can undergo repairs as and when you want to / can afford to
You have full control over the property
Over the years the property will (probably) appreciate in value so when you sell it in 9+ years time, you'll probably have made a profit
You don't pay any ground rent as you own the property and the land it sits on
You can personalise the house to fit with your personality without asking for permission
Usually the property will have more space than a leasehold property, which usually is a flat
If you purchase a run down property, you get the exciting opportunity to put your own stamp on it
If you're a cash buyer you can't get evicted (unless a compulsory purchase happens but generally speaking, it's not something to worry about)
If you have a mortgage you can only get evicted if you default on the mortgage repayment, so if that doesn't happen you have long-term security (a compulsory purchase can happen here too, but it's not something to usually worry about)
Negatives of Freehold home ownership
Usually Freehold properties are more expensive than leasehold
You are responsible for repairs and property management
There can be complex legal matters noted on the register of title
You have less flexibility if you decide you one day want to upsticks and go travelling
If city living is your thing, then you most probably won't find an affordable freehold property
Depending on what your budget is, you may have to purchase a run-down house to start off with and revamp it
Considerations Before Opting for Freehold
It's important to know that when you are purchasing the freehold of a property with a mortgage you have the responsibility to repay your mortgage payments every month. If you come to the unfortunate circumstance where you can no longer make the monthly mortgage repayments, the property will revert to the lender and they will sell your property (usually at an auction). You have no say in how much it gets sold for. Once the bank has retrieved the mortgage amount, you'll get whatever is left (if there is anything).
This is called a 'repossession' but it's important to consider that just because you have the highest form of property ownership with freehold tenure, it doesn't mean that you can't get kicked out of the property. Technically speaking if you are taking out a mortgage, you are loaning the property from the bank until you pay off the mortgage completely. So although by title you will have freehold ownership, you do have to make sure that you can afford the property that you potentially purchase.
Conclusion
Freehold home ownership is a fantastic option for first-time buyers as it allows you to have full control of your property and land so that you can really put your stamp on it! If you're looking for long-term security then this type of home ownership is for you!
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