Financing a Leasehold Property
You own the home. Someone else owns the ground under it. Agency and government programs finance leaseholds; most jumbo and home equity programs do not.
Quick answer
Saxton Mortgage does. At least one FHA purchase program we offer lists leasehold estates as an eligible property type, and at least one VA program accepts them when the leasehold is VA approved. At least one rural housing program also allows leasehold estates, but manufactured homes on leasehold property are not eligible on it.
A leasehold estate is financeable
The building is yours. The land comes with a lease.
- Leasehold estates appear in the eligible property type list on FHA purchase, refinance, and streamline refinance programs.
- They are eligible on VA purchase and refinance, where the leasehold has to be VA approved.
- Rural housing programs and conventional programs including HomeReady and Home Possible list leasehold estates as eligible.
- A mortgage subject to a leasehold estate requires a specific title insurance endorsement, the ALTA 13.1.
- Appraisal waivers are not available on leasehold properties. Plan on a full appraisal.
- Most jumbo, non-qualified mortgage, and home equity programs in our guidelines list leaseholds as ineligible. Program selection is the whole game here.
FHA and VA eligible
Rural housing programs
Conventional financing
Condominium leaseholds
Purchase or refinance
Title endorsement handled
Where Leaseholds Actually Come Up
It is a regional and situational thing, and if you are in one of these situations you already know.
Hawaii has the deepest concentration of residential leasehold property in the country, much of it in condominium buildings where the land is held by a trust or an estate. Parts of New York, some California communities, land held in trust for tribal nations, and certain planned communities and mobile home parks also use ground leases. Occasionally a leasehold turns up somewhere unexpected, attached to a single building on land owned by a church, a university, or a municipality.
What decides whether a lender will finance it is the lease itself: how many years remain, what the renewal terms are, what the ground rent is and how it escalates, and what happens at expiration. Lenders and appraisers read the lease, and a short remaining term relative to the mortgage term is the most common reason a leasehold file fails. This is why getting a copy of the ground lease into the file early matters more than almost anything else.
The title endorsement is a specific and non-negotiable item. Guidelines require an ALTA 13.1 endorsement on a mortgage subject to a leasehold estate. Your title company will know it, but flagging it at the opening of the file avoids a delay at the end.
What to know before you buy a leasehold
Six things that separate a leasehold purchase from a fee simple one.
The Remaining Lease Term Drives Everything
A lease with decades remaining behaves very differently from one approaching expiration. Get the remaining term before you get attached to the property.
Ground Rent Can Escalate
Many ground leases include periodic rent resets. A reset that lands during your ownership changes your housing cost in a way a fixed mortgage payment does not. Read the escalation provisions.
Your Lender Options Are Narrower
Government and conventional first liens are broadly open to leaseholds. Jumbo programs, non-qualified mortgage programs, and home equity and second lien products in our guidelines largely exclude them. If you need one of those, the answer may simply be no.
You Will Need A Full Appraisal
Appraisal waivers are excluded on leasehold properties across the agency programs that otherwise offer them. Budget the cost and the time.
VA Requires Its Own Approval
On a VA loan the leasehold has to be VA approved, which is a separate determination from the property meeting other VA requirements.
Resale Is A Smaller Market
The same lender constraints that apply to you will apply to your buyer. That is worth weighing when you think about how long you plan to hold the property.
Hear From Homeowners Like You
Frequently Asked Questions
Questions about leasehold and land lease financing.
Saxton Mortgage does. At least one FHA purchase program we offer lists leasehold estates as an eligible property type, and at least one VA program accepts them when the leasehold is VA approved. At least one rural housing program also allows leasehold estates, but manufactured homes on leasehold property are not eligible on it.
You own the improvements, meaning the house or the unit, and you lease the land it sits on from whoever owns it. At the end of the ground lease, ownership of the improvements typically reverts to the landowner unless the lease is renewed or extended.
Yes. Leasehold estates appear in the eligible property type list on FHA purchase, standard refinance, and streamline refinance programs.
Yes, with an additional requirement. VA purchase and refinance programs list leasehold estates as eligible provided the leasehold is VA approved.
Usually not. Jumbo and non-qualified mortgage guidelines in our library generally list leaseholds among ineligible property types. If the loan amount is above conventional limits, this is the first thing to check.
Probably not. The home equity lines we offer are written around fee simple ownership. One lists a leasehold in an individual name under its title rules, so have your file reviewed before ruling it out. We also offer fixed home equity loans, up to $1,000,000 with at least one program.
A title insurance endorsement specific to leasehold estates. Guidelines require it on any mortgage subject to a leasehold. Your title company issues it; we just make sure it is ordered.
There is no single national number in our guidelines. What matters is the relationship between the remaining lease term and the mortgage term, which is evaluated with the lease in hand. Send us the ground lease and we can tell you early.
A leasehold mortgage is secured by your interest in the ground lease and the improvements, meaning the house or the unit, rather than by the land itself, which you lease from whoever owns it. That is why lenders read the lease before anything else: the remaining lease term is measured against the mortgage term, and the title company issues an ALTA 13.1 leasehold endorsement. Leasehold and mortgages pair most easily on FHA, where leasehold estates are an eligible property type, and on VA when the leasehold is VA approved. Jumbo and most home equity products in our guidelines exclude leaseholds, so the loan amount and the product decide the answer as much as the lease does.
No. A leasehold improvement loan is commercial financing a business tenant uses to build out space it rents, and it is not a mortgage product. This page covers residential leasehold property, where you own the home and lease the land under it. If you own a house or condo on leased land and want to buy, refinance or borrow against it, this is the right page; if you are a business looking to finance a build-out of rented space, a commercial lender is the right call.
Find out what you qualify for
The ground lease answers most of the questions on this page. Send it over with the property address and we will tell you which programs will finance it before you write an offer or pay for anything.
Get Pre-QualifiedLeasehold eligibility varies substantially by program and investor and is subject to change. Many jumbo, non-qualified mortgage, home equity, and second lien programs list leasehold estates as ineligible property types. Remaining lease term, ground rent terms, and title endorsement requirements apply. Saxton Mortgage does not provide legal advice regarding ground leases. Not all applicants will qualify. This is not a commitment to lend.