Ground Lease Mortgage 2026: What It Is and Why Most Lenders Avoid It

A ground lease (also called a land lease) is a long-term lease of land on which the borrower owns the improvements. The buyer purchases the structure but leases the underlying land from a landlord. Hawaii, New York City, and certain planned communities have significant concentrations of ground lease properties. Most standard lenders pass on them without doing the required lease review.

Agency Requirements for Ground Lease Financing

Fannie Mae (B5-3.4-01) will purchase ground lease loans if the lease meets specific requirements: the lease must be properly recorded, must contain mortgagee protection provisions (including notice of default and cure rights for the lender), must permit assignment of the leasehold interest, and the remaining lease term must extend substantially beyond the loan maturity. Fannie Mae requires a minimum remaining term plus any renewal options to cover the loan term with adequate cushion.

FHA and VA Ground Lease Rules

FHA (HUD 4000.1) requires the ground lease to have a remaining term of at least 99 years from the date of the mortgage, or the lease must be renewable so that the remaining term extends at least 10 years beyond the amortization period. The lease must include standard lender protection provisions and must permit the leasehold to be mortgaged. VA has parallel requirements focused on adequate remaining term and mortgagee protection provisions.

The Practical Challenge

Ground lease review requires the complete lease document at application. Title companies must issue a leasehold title insurance policy with endorsements specific to the ground lease. Many lenders do not have the internal expertise to review ground leases and decline rather than conduct the review. If you take a ground lease file, confirm your lender accepts them before ordering the appraisal. Also verify the title company is experienced with leasehold endorsements in that specific state.