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  • Buy-to-Let

    Low Lease extension



    Hi All

    I’m a property enthusiast with some experience and I have an opportunity to buy a flat with lease of 58 years at discounted price.
    The agent states that this is cash purchase only. My query is whether I need a cash to purchase it at the beginning and serve the notice to landlord for lease extension on completion then apply for mortgage at higher value once completed straight away? Then I should get some of money invested back.
    Is there any other option without cash purchase?
    Please correct me if Im wrong. I have never dealt with this type of strategy.

    Big Thanks in advance

    Paul

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    Hi Paul,

    With 58 years remaining, there are financing options open to you, both bridging and a long term mortgage. To extend the lease, the current leaseholder needs to apply and assign the benefit of the application to you. Otherwise you will have to wait two years before applying to extend. But to answer your original question: no, you can finance the purchase.

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    You will need to be careful that the discount fully reflects the total cost of lease extension - noting that you have both your own and freeholders legal fees to cover - and with substantial marriage value involved with a 58 yr lease residue the cost of extension will likely be tens of thousands of pounds.

    There are lease extension calculators online for a rough estimate.

    You should also check costs of any major works being planned for the block. Service charge will be yours to fund even if you have a Tenant in situ - so that lowers the yield compared to a freehold property.

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