If you're house-hunting in BC, you'll likely run into two types of property ownership:
freehold and leasehold. They’re a bit like different flavors of ice cream—they might look similar, but each has its own distinct twist.
- Freehold: You own both the land and the structure. It’s yours, no strings attached, and you have the right to make your mark on it forever (or as long as zoning permits).
- Leasehold: Here’s the plot twist—you own the home or building but not the land it sits on. Instead, you lease it from the landowner for a set period. Often, leaseholds are found in unique areas like government-owned properties, indigenous lands, or certain city-owned sections, and they’re typically more affordable than freeholds.
Not all leaseholds are created equal! You’ve got
prepaid and
non-prepaid leaseholds:
- Prepaid Leaseholds: Imagine paying for your land lease all at once. No monthly land rent here! This arrangement often feels a bit more like homeownership and can offer better resale value since buyers won’t be saddled with regular land payments.
- Non-Prepaid Leaseholds: Here, you pay for the land lease in regular installments. While this can help you budget, it also adds a recurring expense, which can make it less appealing for resale.
For leaseholds, understanding the
lease term and
renewal conditions is critical. Picture buying a home with a lease set to expire in, say, 15 years. When that day comes, what happens? You might get an offer to renew the lease—but often at a new price. Knowing these terms upfront can save you from surprises down the road.
Here’s a heads-up:
securing a mortgage on a leasehold is often trickier than on a freehold. Banks view leaseholds as higher-risk since you don’t own the land. This can translate to stricter lending terms, shorter mortgage terms, or even higher interest rates. Freeholds, by contrast, typically come with fewer hoops to jump through.
If you’re in the market for a more affordable option and the lease terms are favorable, a leasehold could be a smart choice! Just be sure to consider:
- The lease expiration date and renewal terms
- Any monthly or annual land payments required for non-prepaid leases
- Whether the mortgage options work with your financial goals
Whether freehold or leasehold, buying property is all about finding what suits your lifestyle and budget. Ready to dive deeper into property options? Reach out to get a personal consultation and make that perfect home choice!
