Tuesday 1 July 2008 10.50am
I think you'll find that it is down to marriage value which kicks in at under 80 years (although at this point, the cost of the marriage value will be low).
why is it necessary to have a lease that is longer than the average lifespan of most people? Surely a mortgage company should only start to worry if the lease gets below 20 years?
No, because if you default, you are left with a worthless asset - because nobody else will buy it - because even if they do, nobody will buy it from them... so they won't pay much for it.
and how come the price to buy more lease goes up the longer you leave it - that should be the same per year If I want to buy 20 years now - at an example cost of £20...
Because you are buying the right to occupy your flat from 2089 to 2108 - essentially worthless at the moment, so relatively cheap.
Imagine it reaches 2088 and you want to buy the same time period, i.e. the next 19 years. Effectively you'd be paying 20 years full market rent up front - imagine the bill for doing that for 2009 to 2028.