The Mortgage Implications of Short-Lease Properties

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    When considering the purchase of a property with a short lease, it’s essential to understand how this can impact your ability to secure a mortgage. Mortgage lenders typically view short-lease properties as higher risk, which can lead to several challenges for buyers. In this blog post, we’ll delve into the mortgage implications of short-lease properties, the factors lenders consider, and how you can navigate these complexities.

    Understanding Short Leases

    A short lease generally refers to a property lease with fewer than 80 years remaining. As the lease term decreases, the property becomes less attractive to both buyers and lenders due to potential complications and costs associated with lease renewal or extension. [Learn more about the basics of leasehold properties].

    How Lenders View Short-Lease Properties

    Increased Risk

    Lenders view short-lease properties as a higher risk for several reasons:

    Depreciating Asset: The value of a property with a short lease diminishes over time, which can affect the lender’s security.

    Difficulty in Reselling: Properties with short leases are harder to sell, reducing the lender’s options if they need to repossess and sell the property.

    High Extension Costs: Extending the lease can be expensive, and lenders worry about whether borrowers can afford these additional costs.

    Loan-to-Value (LTV) Ratio Adjustments

    Lenders might offer lower Loan-to-Value (LTV) ratios for short-lease properties. This means that you may need a larger deposit to secure a mortgage. For instance, instead of the typical 80-90% LTV for a standard property, you might only be able to get 60-70% LTV for a property with a short lease.

    Specific Lease Length Criteria

    Different lenders have varying criteria for lease lengths. Generally, the shorter the lease, the fewer lenders are willing to offer a mortgage. Here’s a rough guide:

    Over 80 Years: Most lenders are comfortable providing mortgages.

    70-80 Years: Some lenders might impose stricter conditions or lower LTV ratios.

    50-70 Years: Fewer lenders are willing to provide mortgages, often at significantly reduced LTV ratios.

    Under 50 Years: Very few lenders will offer a mortgage and those that do often have stringent requirements and high interest rates.

    Impact on Interest Rates and Fees

    Due to the perceived higher risk, mortgages for short-lease properties often come with higher interest rates and additional fees. Lenders may charge a higher rate to offset the potential risks associated with lending on a property that might depreciate faster than its freehold or long-lease counterparts.

    Potential Solutions for Buyers

    Lease Extension

    One way to mitigate the mortgage implications of a short-lease property is to extend the lease before applying for a mortgage. However, this requires the current owner’s cooperation and can be costly. Learn how to extend your lease.

    Specialist Lenders

    Some lenders specialise in providing mortgages for short-lease properties. These lenders understand the complexities and may offer more flexible terms, albeit often at higher costs.

    Increased Deposit

    If you’re set on purchasing a short-lease property, be prepared to put down a larger deposit. This reduces the lender’s risk and increases your chances of securing a mortgage.


    Purchasing a short-lease property presents unique challenges, particularly when it comes to securing a mortgage. Lenders view these properties as higher risk, leading to stricter lending criteria, lower LTV ratios, and potentially higher interest rates. However, by understanding these implications and exploring options like lease extensions, specialist lenders, and larger deposits, you can navigate the complexities and make an informed decision.

    If you’re considering buying a short-lease property, it’s crucial to seek professional advice to understand all your options and make the best financial decision. Contact us today for expert guidance on lease extensions and personalised mortgage advice tailored to your situation.

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