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Freehold vs Leasehold

What is the difference between Freehold and Leasehold?

When it comes to properties, you’ll come across one of these terms, Leasehold or Freehold. Often we purchase a property with only thoughts of the physical house, whether it’s a condominium or a landed home. As such, not many homebuyers knew that the properties they are buying might not sit on the same type of land.

However! Is it essential to know the differences? We’ll let you be the judge!

Freehold

The popular choice among homebuyers, freehold is a land that belongs to you in perpetuity. There is no government control, allowing developers to build freehold bungalows, condominiums, and even private homes on that piece of land.

A freehold property holds the least stringent limitations, allowing you to subdivide or allocate the land to however you please. You could even have public works on your land! Although it is still subjected to any town planning controls.

For condominiums or other high rise residential properties, it is slightly different when owning a freehold property. The land of the development is still mainly owned by the developer.

For homebuyers of high rise homes, only a stake that is dependent on the unit is owned. The transfer of ownership is less hectic than leasehold properties.

Leasehold

The lesser favored title in the market. Leasehold is where a plot of land is leased to you for some years. In Malaysia, it is 30, 60, or 99 years. In some cases, it could go to 999 years!

When the term expires, the ownership of the land is transferred back to the State authority. To extend, one must apply for renewal before the expiration and pay a premium when it is approved, which depends on the current market value of the property. The sum expected could go up to the original sum paid.

Leasehold land is more restrictive in comparison with freehold land, limiting the type of activity that could be performed on the land, such as land cultivation. It is also more affordable than a freehold property, and better equipped with facilities as well as features to make it more attractive.

Nevertheless, the uncertainty of renewing the lease in older leasehold properties may prove them difficult to sell. Bank loans are also not easily approved when you lease a property on a shorter tenure; many would prefer at least more than 50 years remaining on the lease.

On the off chance that you do get the loan, the financing might be lower than a freehold property. Therefore, you have to fork out more money for the down payment.

When buying a property, is it best to be mindful of the land tenure of the property, but it should not be your only deciding factor for purchase. The objective and housing affordability are just as important to consider! Nevertheless, with the current situation, new home buyers are more concerned over the pricing rather than the land title of freehold or leasehold.

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