Leasehold? Freehold?

Some new investor or first home buyers could get confused about certain attributes of the property that they are going to purchase. Freehold and leasehold are one of them. Usually people will notice them through the difference in price of the two type of properties.

If you own a home freehold, it means that you own the building and the land that it stands on until the day that you sell it to someone else. A freehold property can be held by the owner indefinitely. It is one of the reason that advertisements often declare that the building is freehold as it will fetch a higher price. People living in it feel safer as they will not be kicked out when lease expires because it has no lease. *But if government decides to blow off your flat/condo to make way for further development, the status of freehold or not does not help you maintain your house there.

Leasehold is that you own the right to stay in that house for a certain period, but you do not own the building itself. Which mean after the lease expired (usually 99years after its built) , the landlord/government have the rights to take it back (which mean you lose your home). This explains why leasehold properties are usually cheaper than freeholds. If you plan to save on the purchasing price, some leasehold properties can be cheaper up to 20% compared to freehold properties on the same location. However, you will need to think about the selling price when you want to let go of that properties which can be only some ten years left on the lease. Because you yourself wont want to buy a property that is going to kick you out after some years right? Of course there are ways to hold your property - extend the lease or buy it from the landlord.

So before making an offer for leasehold property you’ll need to consider:

- How many years are left on the lease.
- How you’ll budget for service charges and related costs.
- How the length of the lease might affect getting a mortgage and the property resale value.

*If the lease is for less than 70 years, you might struggle to get a mortgage.

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