If you are thinking about taking on a massive financial commitment, such as buying a home with a mortgage, you will do best to first understand the terms under which you will own your home, whether it be a house or a flat.
In the context of residential mortgages, the table below lists major distinctions between two common forms of property ownership you should familiarise yourself with.
|Best and highest form of property ownership in England and Wales 1|
|A house (usually)||A flat (usually) OR a house bought through a shared ownership scheme|
|Pay the purchase price and pay no more additional charges in the future to the 3rd parties for managing your property/land||Pay the purchase price and be aware of future additional charges you may incur later on to manage your property/land, i.e. grand rent, service/maintenance charge|
|You own the house and the land it stands on||You own the flat but not the building and not the land the building stands on|
|You own the house for an indefinitely||You own the flat for as long as your lease agreement lasts for; your lease can be extended at any point but please be aware that there might be a fee payable to a Freeholder for extending the lease.|
|No limit to what you can do in your house as you control your property and land, i.e.: keeping pets, smoking, doing building works (within Permitted Development rights)||You may need permission of a Freeholder for example: to keep pets, to smoke, or to perform any building works; this means you do not have a full control over your property|
|You own the freehold; no charges apply||A freehold could be sold to third parties, resulting in possible ground rent and service charge changes|
|Historically, property value increased with time; however, the property value changes are dictated by the market conditions and the condition of the property itself||The value of the flat is dictated by the market conditions and the lease term remaining; the shorter the lease term the greater the possibility that the property may drop in value|
|Responsibility for the upkeep of the property and is yours||A Freeholder determines who has the responsibility, but you may need to pay towards the upkeep of the property|
|It’s your responsibility to insure the property||In majority of cases a Freeholder is responsible for the insurance of the building (but not the contents) - this may be part of your service charge|
1 Please note, Scotland has a different law than England, Wales, and Northern Ireland, also with regards to the property ownership.