Short answer: yes, but the lender universe is narrow
Second-lien home equity loans and HELOCs are available on leasehold properties in 2026. Fannie Mae and Freddie Mac both require the ground lease to run at least five years past the mortgage maturity date, which sets the practical floor at a 35-year remaining term for a 30-year second lien. But most national HELOC platforms decline leasehold outright. Regional and portfolio lenders in Hawaii, Maryland, and community land trust markets carry the volume.
What a leasehold estate actually is
A leasehold estate splits real property in two. The borrower owns the improvements (the house, or the condo unit), while the land beneath sits with a separate fee owner – the lessor or ground lease holder – and the borrower pays ground rent under a long-term lease, typically 55 to 99 years at origination.
The largest concentrations sit in Hawaii, where Oahu leasehold condos in Kakaako, Waikiki, and Ko Olina dominate the market, and in Baltimore, where roughly 85,000 Maryland ground rents remain on the state registry. Community land trust homes, resort PUDs, and a small pocket of Florida legacy leasehold condos round out the map.
And this regime is distinct from Bureau of Indian Affairs trust land, which is federally held for tribal beneficiaries and financed through the VA’s Native American Direct Loan program. NADL rules don’t apply to private ground leases, and vice versa.
Remaining-term rules by loan program
The numeric thresholds are the single most-searched fact for this topic. They come from four separate rulebooks.
| Program | Minimum remaining term | Alternative | Source |
|---|---|---|---|
| Fannie Mae | Loan maturity plus 5 years | None | Selling Guide B2-3-03 |
| Freddie Mac | Loan maturity plus 5 years | None | Guide Section 5704.1 |
| FHA forward mortgage | Loan maturity plus 10 years | Renewable 99-year lease | Handbook 4000.1 |
| FHA HECM | 50 years past youngest borrower’s 100th birthday | Renewable 99-year lease | Handbook 4000.1 |
Fannie Mae’s B2-3-03, in the version dated 08/05/2026, requires the unexpired lease term to exceed the mortgage maturity date by at least five years. Freddie Mac’s Section 5704.1 sets the same five-year floor and adds explicit language that the lease must permit assignment, transfer, mortgaging, and subletting.
One scoping note. FHA doesn’t directly insure typical second-lien HELOAN or HELOC products, so the 10-year and 99-year renewable rules apply to first-lien FHA refinances rather than to a HELOC decision. For HECM reverse mortgages, the remaining term must extend at least 50 years past the youngest borrower’s 100th birthday, or the lease must be renewable for 99 years.
Worth knowing: Announcement SEL-2024-07 tightened several provisions effective for applications on or after 3/1/2025, covering notice-of-default protections, merger-of-title language, permitted assignments, and condemnation proceeds. And for leases signed on or after 9/1/2025, the fee estate itself must be free of prior secured liens unless the fee lienholder signs a recognition or non-disturbance agreement.
What lenders look for beyond the term
Term alone doesn’t qualify a leasehold. Underwriters read the ground lease against a checklist that runs deeper than most borrowers expect. The lease has to permit the borrower to mortgage the leasehold estate, and it also has to give the lender a notice-and-cure right (usually 30 days) when the borrower falls behind on ground rent, along with no-forfeiture language that protects the lender if the borrower defaults on lease obligations, so the mortgage can’t be extinguished quietly by the lessor, plus assignment-on-sale rights and, for condominium ground leases, a guarantee that HOA voting rights aren’t stripped from the unit owner. That’s a lot to check in one document. It’s why lender leasehold desks employ paralegals who do nothing else.
Prior liens on the fee estate are the newer concern. Since 9/1/2025 Fannie Mae has required either a clean fee title or a recognition and non-disturbance agreement from any prior fee lienholder. That fixes lien priority so a foreclosure on the fee estate can’t extinguish the mortgage on the leasehold – the same conceptual family as HELOC subordination agreements. Borrowers must also be current on all rent and lease obligations at closing, and title work has to document the ground lease as a specific title exception.
Why most national HELOC lenders decline
Nearly every leasehold second lien is a portfolio loan. It can’t be sold to Fannie or Freddie at scale because the leasehold appraisal, the recognition agreement, and the ground lease review add cost and variability that secondary-market buyers price out. National HELOC platforms built on speed and AVM valuation can’t underwrite around a full leasehold appraisal or a title exception that needs a lease review.
So portfolio lenders in leasehold-heavy markets pick up the volume instead, at slightly higher rates and with lower CLTV caps, often 5 to 10 points below fee-simple ceilings. Stack that overlay on top of the occupancy-based CLTV limits and a second home or investment property leasehold can find itself capped well below the 85 to 90 percent ranges typical for a primary fee-simple home.
Leasehold home equity lending by market
Hawaii. Bank of Hawaii, First Hawaiian Bank, American Savings Bank, Hawaii State Federal Credit Union, HFS Federal Credit Union, and portfolio shops such as Myers Capital Hawaii have historically financed leasehold second liens on Oahu condos. Confirm current policy directly with each institution before applying. Ground rent structures on Hawaii condos often reset every 10 or 15 years, which drives the leased-fee value on the appraisal and, on shorter leases, drives the leasehold value down.
Baltimore and Maryland ground rent. Most local Maryland banks and credit unions accept ground-rent properties as long as the ground rent is registered with the Maryland Department of Assessments and Taxation, currently paid, and disclosed as a title exception. Rents typically run $50 to $150 per year, paid semi-annually. At closing borrowers must be notified of the right to redeem the ground rent, which converts the leasehold into fee simple. Redemption typically costs 12 to 16 times the annual rent, roughly $1,000 to $3,000 including title work.
Community land trust homes. The CLT ground lease and the Fannie Mae CLT rider (Form 2100 series) control the transaction. Because the CLT often holds approval rights over both the loan amount and any cash-out (and some CLTs restrict cash-out purposes to home improvement or education), borrowers can’t assume a standard menu is on the table. Manufactured homes are excluded from Fannie Mae CLT financing even on a permanent foundation. Read the specific CLT ground lease before assuming any cash-out is allowed.
The leasehold appraisal and the equity cliff
Appraisal on a leasehold follows a three-step method under Fannie Mae B4-1.4-05. The appraiser derives fee-simple value from comparable sales, converts the ground rent income stream to a leased-fee value using a market capitalization rate, and subtracts the leased-fee value from the fee-simple value to arrive at the leasehold value used for LTV.
On Baltimore ground rents at $96 per year, the leased-fee subtraction is trivial and the leasehold value approximates the fee-simple value. But on a Hawaii condo with $18,000 in annual ground rent and 28 years remaining before a scheduled lease-rent reset, the leased-fee subtraction is material – and that’s before the reset lands.
This is the leasehold equity cliff.
Equity that looked healthy at 45 years remaining thins fast as the lease shortens past 30 years, and a scheduled rent reset can compress it further in a single quarter. So the full appraisal requirement is why leasehold applications almost always exit the AVM lane. Automated valuation products can’t model the leased-fee subtraction, so lenders default to a full URAR with a leasehold analysis attachment.
Redeem or keep the overlay
For Maryland borrowers the decision framework is arithmetic. Twelve to sixteen times the annual rent, plus title work, buys the leasehold out and clears the overlay for future refinances and HELOCs. Households at or below 80 percent of state median income can borrow the redemption cost interest-free through the Maryland Department of Housing and Community Development’s Ground Rent Redemption Loan Program. Confirm current program funding and the income cap directly with DHCD before relying on it.
In Hawaii the redemption path rarely exists (the lessor is typically a large trust or estate that doesn’t sell the fee). Borrowers there price the overlay instead.
Questions to ask a prospective leasehold lender
So which questions actually separate a real leasehold desk from a sales rep who has never touched one? Run this script before submitting an application.
- Do you originate second-lien home equity products on leasehold estates in this state?
- What’s your minimum remaining lease term at loan maturity?
- Do you require a recognition or non-disturbance agreement from any fee-estate lienholder, and who orders it?
- What’s your maximum CLTV on leasehold, and how does it stack with occupancy overlays?
- Do you accept AVM or hybrid valuation on leasehold, or is a full URAR required?
- Do you require the borrower to be current on ground rent at application, closing, or both?
- For CLT homes, do you use the Fannie Mae CLT rider Form 2100, and do you obtain the CLT’s written approval before closing?
- What’s your typical close-to-fund timeline on a leasehold file relative to a fee-simple file?
Requirements vary. Confirm current thresholds with each institution before applying.
FAQ
How many years must be left on my ground lease to get a home equity loan?
For a conforming second lien, the lease must run at least five years past the mortgage maturity date. A 30-year second lien needs 35 years of remaining term.
Can I get a HELOC on a leasehold property?
Yes, from portfolio lenders in Hawaii, Maryland, and CLT markets. National HELOC platforms usually decline because the loans can’t be sold on the secondary market at scale.
Does FHA insure a home equity loan on a leasehold?
No. FHA leasehold rules apply to first-lien FHA refinances and HECM reverse mortgages, not to second-lien HELOAN or HELOC products.
Which lenders do HELOCs on Hawaii leasehold condos?
Bank of Hawaii, First Hawaiian Bank, American Savings, Hawaii State FCU, HFS FCU, and Myers Capital Hawaii have historically financed Oahu leasehold second liens. Confirm current policy directly before applying.
Can I get a home equity loan on a Baltimore ground-rent property?
Yes. Local Maryland banks accept ground-rent properties provided the rent is registered with Maryland DAT, current, and disclosed as a title exception.
Do I need my community land trust’s approval for a cash-out HELOC?
Usually yes. Fannie Mae CLT rider Form 2100 governs, and some CLTs restrict cash-out purposes to home improvement or education.
Should I redeem the ground rent before applying for a HELOC?
In Maryland, redemption at 12 to 16 times annual rent clears the overlay for future financing. Income-eligible households can borrow the cost interest-free through Maryland DHCD’s Ground Rent Redemption Loan Program.
Does a leasehold home equity loan require a full appraisal?
Almost always. AVM products can’t model the leased-fee subtraction, so lenders order a full URAR with a leasehold analysis attachment.
