Should we buy the lease? wwyd?

[msripley]

I'd welcome thoughts on this.

Dh and I rent out a mid-link house which is on a buy-to-let mortgage and is currently leasehold with 65 years left to run.

The ground rent is about £100 a year and in theory we're supposed to pay the leaseholder a £50 administration fee each time the tenant changes.

We have a small endowment policy maturing soon which would be enough to pay off the lease which would cost about £5k.

But we're trying to weigh up if it would better to pay this off the mortgage instead (or indeed off the mortgage for the house we live in).

We're planning to keep the rental house for around 10 more years before selling it, though it's possible we might hang onto it for longer.

TIA - all thoughts welcome.

It depends if you are renting the house for an income or for capital gain. If it's for capital gain, then extend the lease or buy the freehold so that the property has more value. If it's for the rental income and you don't particularly care what happens to it after you die, pay a portion off the mortgage (but be aware that you will end up paying more tax on your income).

As you want to sell, I would definitely extend the lease as it will make it much more attractive to buyers - as I understand it, the house could be unmortgageable if the lease is under 60 years - some banks won't lend under 75 or 80.

Thanks lala - yes, it's (hopefully) for capital gain though if we sold it now we would almost certainly lose money. I'm leaning towards the idea of buying the freehold, which has the bonus of not ever having to deal with the rather unsavoury leasehold company again.

If you don't extend the lease you will find it very difficult to sell - mortgage companies usually require a minimum of 70 years to be left on a lease

Definitely extend the lease as if you pay it off the mortgage you could lose the 5k when you sell as the short lease will be a disadvantage.Also any lease under 80 years is subject to a 'marriage'value charge which is another hassle when you sell

Thanks all - that's unanimous then, we'll definitely buy the freehold.

you might not be able to buy the freehold. if not, then definitely extend your lease.

Thanks HerHonesty - yes, we can buy the freehold - we've had a quote for it already, but will need to have an update as it'll cost more now that a few years have passed.

We may need to employ a surveyor to advise if the price being asked is a fair one though - the lease company seem like a bunch of sharks.

yes, definitely employ a surveyor. otherwise you are going in blind.