The Mortgage Supply Co | 10 Jun 2019 | Building Home,Freehold,Leasehold

Leasehold or Freehold? (Understanding the types of ownership)

The Mortgage Supply Co | June 10 2019 | Building Home, Freehold, Leasehold

Leasehold or Freehold? (Understanding the types of ownership)

building your house

'Leasehold' and 'Freehold', seems like another legal term that's hard to understand, but we have made it very simple for you.

In this article, we'll discuss both these terms along with the pros and cons of each.

So without further ado, let's jump straight into it. 


Leasehold is a type of home ownership whereby you own the house, but you lease the land from a landlord in return for a rent. 

Simply put, you own the house, but you don't own the land.

When you own a leasehold property, you have your house on your landlord's property. And if someone has their property on someone else's land, what do they need to do? You guessed it right, they have to pay the rent.

Here are some pros and cons of Leasehold:


1. It's affordable

Buying land in New Zealand, especially in Auckland, can prove to be very costly. But since you're not buying the land, it'll save you hundreds of thousands of dollars.

2. You can have your own house in a posh area

Can't seem to buy a house in more expensive area? No worries, you can go for leasehold.

3. You own the house

Unlike renting, leasehold allows you to have your own home. You can poke holes in the ceiling to fix that exotic chandelier and put a new coat of paint on the walls - it's your home, you can do what you want.


1. The landowner, not you, benefits from the increase in land value

You're paying thousands of dollars to the landowner so they can build their asset. Even though you'll be saving a lot of money in the short-term, you won't be building any assets for yourself.

2. Rent can increase exponentially with time

If the price of land rises, your rent rises with it. So be prepared when the lease review period comes. In 2010, an Auckland woman, who owned a leasehold property, found herself in an infuriating situation when the annual rent was increased from $8300 to a whopping $73,750.

3. Getting finance for leasehold could be tricky

Banks demand higher deposits for the mortgage. Not only this, but the terms for leasehold finance can also be complicated. If you're having difficulty getting your loan approved, you know where to contact us.




Freehold can be defined as a type of home ownership whereby the land as well as the house belongs to owner indefinitely.

If you own a freehold property, it means that you own the land as well as the house - it's complete ownership.

As the name suggests, "freehold" gives you more "freedom".

Here are some pros and cons of freehold:


1. You have absolute control over your property

Unlike leasehold, freehold gives you complete control over your house as well as the land.

2. You'll know exactly what you're paying

No one will knock on your door and tell you that your rent is being increased from $10,000 to $50,000. You'd already know what your mortgage is and that's all you need to pay, apart from the general maintenance expense and utility fees.

3. Housing is typically an appreciating asset.

This is the biggest benefit of a freehold property. The financial value of your land and house it is common to increase over time. Do you know what the median house price in New Zealand was in January 2013? It was $370,000, and it increased to $550,000 in 2019. 


1. Higher down payment

Since freehold properties cost more, the down payment is much higher than leasehold properties.

2. Can create immense financial pressure

Once you have a mortgage, the majority of your income will be spent paying it. But don't let that hold you back, you can always refinance your home loan and have a shorter term or a decreased interest rate.

It's important that you know the type of ownership before you buy your home to avoid any disappointment later.   On the Title and on the Sale and Purchase agreement it will give you the detail ie Freehold, Leasehold etc.

And if you're finding it difficult to make a decision or need any other first home-related advice, please don't hesitate contacting us.