It can seem like a quite complicated picture, so what’s the best way to approach home ownership in the UK? The deceptively simple answer here is this: it depends on your situation. Here, we explain all the main ways to get into home ownership.
Leasehold vs freehold The two main variants of property ownership in the UK are freehold and leasehold properties. At its most basic, the freehold of a property means you own the land of a property and the property itself in perpetuity – there is no end date to this. With a leasehold, you don’t own the land the property is built on. Instead, you effectively ‘rent’ it from a landowner. Having said that, leases – especially on new-build properties – run for many decades or even centuries. In fact, 999-year leases are not uncommon.
However, while this is in essence the nature of freehold and leasehold ownership, this is a somewhat simplistic explanation. In reality, there are many complications and complex permutations when it comes to purchasing property, depending on the property type. That’s why it’s always a good idea to employ the services of a professional real estate agent and use their expertise to help guide you.
What about shared ownership?Similarly, it might be tempting to enter into a shared ownership agreement on a property, as it makes the purchase price of a house much more tempting, but in reality shared ownership will give you less equity in a property and therefore offer less scope for equity growth.
For example, in the case of a leasehold or freehold purchase with a mortgage, the equity growth is often higher than the interest rate of your loan, so the end-value of your investment is greater than that which you’ve paid in. This is not always the case with shared ownership.
What type of purchase is right for which type of property?
If you’re after a freehold property, it’s most likely you’ll need to purchase a house. Houses are not always sold on a freehold basis, but whether it’s a Victorian, Edwardian or post-war property, a house is likely to be sold as freehold.
Flats, conversely, are most likely to be sold as leasehold, but with long leases commonplace, it’s a safe and sensible path to purchase as you still 100% own the property. This is especially true with new-build and relatively new flats.
Whichever route you take to your property purchase, always seek out the advice of professional real estate experts to help you make the right decision for you.