More than two in five first-time buyers are under-informed about the property market and cannot pin down the distinction between a leasehold and freehold property, research from AA Legal Services has suggested.
The difference between a freehold property, which an owner holds to perpetuity, and a leasehold, contracted to the owner for a fixed period of time, was least well understood among young homebuyers in northern regions of the UK, the study of 'mortgage literacy' revealed.
The consequences of ignorance could be severe if homebuyers rush to scale the property ladder without properly understanding the commitments they are entering into.
A more detailed understanding of the financial and legal small print could help first-time buyers make sensible decisions, AA Legal Services head James Molloy remarked.
Young people between the ages of 18 and 24 were worst informed about the difference between freehold and leasehold properties, but their misunderstandings could prove expensive, he said, with the average home costing this group almost £160,000.
Meanwhile, studies have shown the average house price now stands at £180,000 for all homebuyers, in spite of four successive base rate rises.
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