101 Streetsmart Condo Buying Tips for Canadians (2006). Douglas Gray, B.A., LL.B.. p. 44.
A leasehold mortgage is a mortgage on a house or condominium where the land is rented rather than owned. The mortgage must be amortized over a period that is shorter than the length of the land lease. Normally a lender will not grant a mortgage on leasehold property unless the duration of the lease is of sufficient length that the risk is fairly minimal to the lender. For example, [Plight 1] if a condominium is on leasehold land with a 99-year lease and there are 85 years left on the lease, then there is relatively little risk to the lender [mine]. On the other hand, [Plight 2] if the leasehold is for a 30-year period and there are five years left on the lease, the lender will consider the risk too high, because at the end of the five-year period the lease will expire and therefore there is no right or entitlement to
the leasehold interest. This would mean that the condominium would have no value to a potential purchaser after five years.
I understand that plight 2 (5 years left) is more pressing than plight 1 (85 years left), but how does Plight 1 beget only "relatively little risk to the lender"?
I'll be dead in 85 years, but I'd like my younger sibling to live comfortably. How can anyone shrewd buy such a condominium, and overlook the risk of the land lease expiring without being allowed to renew? If I'd be too frightened to buy now, wouldn't a lender be too startled to lend?