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Dino D

Original Poster:

1,858 posts

107 months

[news] 
Saturday 29th September 2012 quote quote all
Scenario: property worth 500k (market valuation from surveyor).
Tenant paying 1,500 rent pm.

Tenant proposes to buy property for 520k by paying as follows:
15k down now.
1,500pm 'rent' over 5yrs (to be deducted from sale price) = 90k.
After 5yrs 415k remains to be paid.
Tenant proposes to get mortgage for that balance.

Will the 105k paid by that time count as a deposit for mortgage purposes or will the lenders still want 25% of the 415k as a deposit?
This is assuming the property value remains static at 500k.


Edited by Dino D on Saturday 29th September 21:18

Sarnie

3,034 posts

95 months

[news] 
Saturday 29th September 2012 quote quote all
Dino D said:
Will the 105k paid by that time count as a deposit for mortgage purposes or will the lenders still want 25% of the 415k as a deposit?
This is assuming the property value remains static at 500k.
Nope.

This is one of the strangest proposals I've seen in a while....

Dino D

Original Poster:

1,858 posts

107 months

[news] 
Saturday 29th September 2012 quote quote all
Would the lender take any account of the fact that the buyer has paid off a large chunk already or just look at as loan on a house that is being sold BMV and usual deposit rules apply?

Sarnie

3,034 posts

95 months

[news] 
Sunday 30th September 2012 quote quote all
Dino D said:
Would the lender take any account of the fact that the buyer has paid off a large chunk already or just look at as loan on a house that is being sold BMV and usual deposit rules apply?
Renting is renting. Therefore anything paid as rent, is rent. Not deposit.

Also , even if it was a goer, he would need 10% of the purchase price as a deposit (£500k) not 25% of £415k.

The only way this would have a chance in hell of passing lending criteria was if the property owner was the parent and the tennant was the child and the deposit was a gifted deposit.


Dino D

Original Poster:

1,858 posts

107 months

[news] 
Sunday 30th September 2012 quote quote all
So rent really is the wrong word to use here as its actually a payment towards to property.

So if we called it the correct name, say 'consideration' rather than rent is the other way to structure this so that after 5 years the buyer can get a mortgage and have the payments to date considered as deposit on a loan for the remaining balance ?
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groak

3,254 posts

65 months

[news] 
Sunday 30th September 2012 quote quote all
You should do a bit of research into 'rent-to-buy' schemes, and the ancient (and still in use) 'deposit and instalment' method of purchasing property privately.

Tomorrow I make the 34th (of 40) instalment payments on a shop I'm buying and trading from. The contract wasn't particularly difficult or expensive to draw up. Part of it involved caretaking default on my part. Part of THAT involves (part of) my instalments then being considered as rent. Etc etc.


hamski

141 posts

110 months

[news] 
Tuesday 2nd October 2012 quote quote all
I've come across this scenario and there are lenders out there who will use the rent paid as a deposit. The main criteria is that the property is still being bought at market value and that there is a paperwork trail to show what has been agreed. I think the most important thing is to get a solicitor who has done this before.

smokey145

616 posts

36 months

[news] 
Wednesday 3rd October 2012 quote quote all
Which lenders do this? I am in the exact same scenario and I need to find a lender I can secure this house with.
hamski said:
I've come across this scenario and there are lenders out there who will use the rent paid as a deposit. The main criteria is that the property is still being bought at market value and that there is a paperwork trail to show what has been agreed. I think the most important thing is to get a solicitor who has done this before.

Sarnie

3,034 posts

95 months

[news] 
Thursday 4th October 2012 quote quote all
smokey145 said:
Which lenders do this? I am in the exact same scenario and I need to find a lender I can secure this house with.
hamski said:
I've come across this scenario and there are lenders out there who will use the rent paid as a deposit. The main criteria is that the property is still being bought at market value and that there is a paperwork trail to show what has been agreed. I think the most important thing is to get a solicitor who has done this before.
Does the vendor currently live in the property?

There are what's called Let-To-Buy mortgages available but they carry some pretty specific criteria, and the details mentioned by the OP would not fit the criteria of a LTB mortgage.....

smokey145

616 posts

36 months

[news] 
Thursday 4th October 2012 quote quote all
Sarnie said:
smokey145 said:
Which lenders do this? I am in the exact same scenario and I need to find a lender I can secure this house with.
hamski said:
I've come across this scenario and there are lenders out there who will use the rent paid as a deposit. The main criteria is that the property is still being bought at market value and that there is a paperwork trail to show what has been agreed. I think the most important thing is to get a solicitor who has done this before.
Does the vendor currently live in the property?

There are what's called Let-To-Buy mortgages available but they carry some pretty specific criteria, and the details mentioned by the OP would not fit the criteria of a LTB mortgage.....
No, i (the tenant) is currently living in the house. and my contract with him is actually LTB with this in mind. does anyone know which lendors would do LTB where the rent payments could contribute towards the deposit?

Sarnie

3,034 posts

95 months

[news] 
Thursday 4th October 2012 quote quote all
smokey145 said:
No, i (the tenant) is currently living in the house. and my contract with him is actually LTB with this in mind. does anyone know which lendors would do LTB where the rent payments could contribute towards the deposit?
Don't get rent to buy, confused with LTB.

LTB is when you own the property, and let it out with the lenders permission, to allow you to purchase another property.

With regards to rent-to-buy I'm assuming it may be someone within the specialist market as no one on the high street would entertain it....

smokey145

616 posts

36 months

[news] 
Thursday 4th October 2012 quote quote all
Do you know anyone I could talk to in the specialist market??.....

Sarnie

3,034 posts

95 months

[news] 
Thursday 4th October 2012 quote quote all
smokey145 said:
Do you know anyone I could talk to in the specialist market??.....
Not with regards to rent-to-buy I don't. I've spoken to a few people today and no one came up with anything of any use, most were coming back with LTB products. Hamski seems to think that there are lenders who will do it so you may be best to drop him a mail.

Let us know how you get on, as I'd be curious to know too smile

smokey145

616 posts

36 months

[news] 
Thursday 4th October 2012 quote quote all
Sarnie said:
smokey145 said:
Do you know anyone I could talk to in the specialist market??.....
Not with regards to rent-to-buy I don't. I've spoken to a few people today and no one came up with anything of any use, most were coming back with LTB products. Hamski seems to think that there are lenders who will do it so you may be best to drop him a mail.

Let us know how you get on, as I'd be curious to know too smile
thanks mate.

hamski

141 posts

110 months

[news] 
Friday 5th October 2012 quote quote all
I did one of these last month with Leeds building society. If you need more info, let me know

Dino D

Original Poster:

1,858 posts

107 months

[news] 
Friday 5th October 2012 quote quote all
I'd be interested to hear more - please pm me?

Sarnie

3,034 posts

95 months

[news] 
Friday 5th October 2012 quote quote all
Hamski,

You may want to explain how you did this as I've spoken to Beverley Ford who is the Leeds BS BDM, via email this morning. I asked her about Rent-to-Buy applications, where rent can be taken as deposit and her response was;

"Hi Liam, just picked up your voicemail. No this is not something we would consider they would need to have the minimum deposit themselves from savings unfortunately.

Regards

Bev Ford
Sales Support Coordinator"



groak

3,254 posts

65 months

[news] 
Friday 5th October 2012 quote quote all
What about a shariah loan? Have you tried that?

smokey145

616 posts

36 months

[news] 
Friday 5th October 2012 quote quote all
hamski said:
I did one of these last month with Leeds building society. If you need more info, let me know
Hamski, could you please PM any information you have on this please as i would be very interested in doing this.

Sarnie

3,034 posts

95 months

[news] 
Friday 5th October 2012 quote quote all
groak said:
What about a shariah loan? Have you tried that?
Shariah's still not going to work I'm afraid.

The only way I could see this working was if the son/daughter was renting a property from their parents and then decided to buy it, the parents could 'gift' the deposit to their kids to the value of the rent paid over the years. But this is only usually available to direct immediate family....
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