How easy to sell a property to a mate?
Discussion
Hi all, I own a small student studio flat, and have done for 30 years (I was a student when I bought it for peanuts - £5k). It's still not worth much (£40k? - in hull).
Anyways, my good mate currently lives in it (rent free) and I want to 'sell' it to him. Problem is, he has bad credit and not a lot of upfront cash, but has decent income now, so can afford a decent monthly payment.
I have a mortgage on it as I remortgaged it a few years back to pay off some debts (there's about £15k outstanding).
So..........how best to do this? Ideally, he should take over the mortgage (but probably can't with his bad debt history) and we'll work out a monthly payment to me for the extra £25k? Do I put the flat in his name on the deeds now? Or won't the mortgage let me?
Does this sound right? Is there a better way to do this? Seems complicated..........I just want to help him out the best way I can. There's no issues around trust either way........we go back too far.
Anyways, my good mate currently lives in it (rent free) and I want to 'sell' it to him. Problem is, he has bad credit and not a lot of upfront cash, but has decent income now, so can afford a decent monthly payment.
I have a mortgage on it as I remortgaged it a few years back to pay off some debts (there's about £15k outstanding).
So..........how best to do this? Ideally, he should take over the mortgage (but probably can't with his bad debt history) and we'll work out a monthly payment to me for the extra £25k? Do I put the flat in his name on the deeds now? Or won't the mortgage let me?
Does this sound right? Is there a better way to do this? Seems complicated..........I just want to help him out the best way I can. There's no issues around trust either way........we go back too far.
Edited by audi321 on Wednesday 2nd March 10:13
andburg said:
seems very risky to me.
If he gets ill/injured/loses his income you have no protection. Consider the strain that would put on your friendship if he stops paying you.
agree the price, get him to mortgage the whole price and then his payments are none of your concern.
I don't care about the risks........I will just give him it if that happens. We're like brothers.If he gets ill/injured/loses his income you have no protection. Consider the strain that would put on your friendship if he stops paying you.
agree the price, get him to mortgage the whole price and then his payments are none of your concern.
vulture1 said:
Could you not just do it all off the books. Get him to pay you £333 a month for 10 years ish and near the end you sell to him at £1 or something like that. Mortgage is still in your name he has effectively paid the current price back to you without needing his credit checked?
I thought about this, but when I 'sell' him it at the end for £1, won't I be in trouble for under declaring the value with the conveyancing solicitor?audi321 said:
I don't care about the risks........I will just give him it if that happens. We're like brothers.
afaik you cant mortgage a property you don't own, for him to get a mortgage you'd need to sign the property over to him. Assuming hes mortgaged £15k to cover your liability you'd want something drawing up legally to show his debt to you, what payments need to be etc etc, ignoring trust this is security in case the worst happens. Given his circumstances I would assume he wont have a will so you need some evidence that in such event he has a debt to you unless you are willing to accept losing out on any debt. The fact you're asking these question suggests that his family aren't able to help him and would probably not want to help you get the money you were owed.I'd work out what his repayments would be at whatever price you agree, set that as his rent and save it.
When his "rent" payments cover say 10% of sale price give them back to him as a gift to cover his deposit and legal fees, sell it to him at that point.
You both win doing it this way.
Why not just continue the current arrangement?
Living rent-free means your mate has little incentive to buy. Has he offered to pay you some rent now he is earning?
Perhaps you could say that you will sell to him at a reasonable (say 20%) discount once he's in a position buy. Until then, there's always a risk that your circumstances change and the arrangement may need to come to an end.
Living rent-free means your mate has little incentive to buy. Has he offered to pay you some rent now he is earning?
Perhaps you could say that you will sell to him at a reasonable (say 20%) discount once he's in a position buy. Until then, there's always a risk that your circumstances change and the arrangement may need to come to an end.
chazwozza said:
Secured loan maybe?
This leaves the issue of how the OP pays off his mortgage.In any case, I would not want to have such an arrangement in place with a mate. "Here you go mate, I'll lend you the money to buy the flat but you'll need to sign this contract that says I can forcibly sell it if you don't pay me back on time".
Thanks for the replies guys. Seems there's no obvious answer to the deal.
I'd like to let him pay me back on a monthly basis (partly to cover the mortgage and partly to pay me back) and then me to sell it to him for £1 in the future (say 10 years), but like I say, are the conveyancers going to allow me to do this? I mean what's the rules on gifting a house for £1. And then there's CGT as I've 'disposed' of it (albeit for a pound?).
I'd like to let him pay me back on a monthly basis (partly to cover the mortgage and partly to pay me back) and then me to sell it to him for £1 in the future (say 10 years), but like I say, are the conveyancers going to allow me to do this? I mean what's the rules on gifting a house for £1. And then there's CGT as I've 'disposed' of it (albeit for a pound?).
You can sell it for anything you want, or transfer ownership for nowt whenever you like.
Two simple ways I see, either get him to pay you a monthly "rent" that you bank for him and subject it to usual tax implications or get him to put something into a long term savings account that you can set up.
Either way, you can leave the property to him in a will should the worst happen to you.
The thing is, you've mortgaged the property so you can either pay it off and let him have it or keep it until such a time. The mortgage is YOUR responsibility.
Even if he's credit line is toxic, with such a small amount owing at £15k he should be able to get some form of secured loan on it.
One point I would make that only you can answer-is giving him a high value item going to cause HIM any issues? Could the responsibility of making payments, taking on finance push him back into whatever troubles caused his financial problems?
Two simple ways I see, either get him to pay you a monthly "rent" that you bank for him and subject it to usual tax implications or get him to put something into a long term savings account that you can set up.
Either way, you can leave the property to him in a will should the worst happen to you.
The thing is, you've mortgaged the property so you can either pay it off and let him have it or keep it until such a time. The mortgage is YOUR responsibility.
Even if he's credit line is toxic, with such a small amount owing at £15k he should be able to get some form of secured loan on it.
One point I would make that only you can answer-is giving him a high value item going to cause HIM any issues? Could the responsibility of making payments, taking on finance push him back into whatever troubles caused his financial problems?
Get him to sign.an assured Short hold tenancy agreement. Do it properly with the correct paperwork. Work out the m9nthly price as 2.5% ÷ 12 x current value, plus value ÷ 15 ÷ 12.
£83 a month for interest.
£223 a month to "buy" the equity.
Round it to £310 a month.
In 15 years you can decide to give it him free or evict him.
Wait. You'll have to pay tax on that. So you probably need to charge £400 a month, to pay the tax.
So anyway. Does he trust you? Put it all into a high interest account in your name. and when it's worth what the flat is then worth, you can decide.
£83 a month for interest.
£223 a month to "buy" the equity.
Round it to £310 a month.
In 15 years you can decide to give it him free or evict him.
Wait. You'll have to pay tax on that. So you probably need to charge £400 a month, to pay the tax.
So anyway. Does he trust you? Put it all into a high interest account in your name. and when it's worth what the flat is then worth, you can decide.
You're a good mate!
I'm not a lawyer, accountant, financial advisor or anything else relevant.
Why not just charge him rent and say that if he manages to pay a certain amount, you'll put his name on the deeds? You could tell him it's 100% of the current value but in your head think that if he gets anything close to 50% (or whatever) then you'll just do it.
I'm not a lawyer, accountant, financial advisor or anything else relevant.
Why not just charge him rent and say that if he manages to pay a certain amount, you'll put his name on the deeds? You could tell him it's 100% of the current value but in your head think that if he gets anything close to 50% (or whatever) then you'll just do it.
What is the interest on your mortgage? 31 quid a month?
Get consent to let
Get AST in place which covers 150% of the interest. Call it £50 a month. There will be income tax on the profit, but it won't be much.
Tell him to Save £125 a week for 6 years. Or £65 a week for 12 years.
At that point you can sell him the flat for £40k, or he will have a £40k deposit to put down against whatever you jointly decide.
If you stop being friends, he will have saved £???
If he cant save, you've protected your investment and given him a home.
Get consent to let
Get AST in place which covers 150% of the interest. Call it £50 a month. There will be income tax on the profit, but it won't be much.
Tell him to Save £125 a week for 6 years. Or £65 a week for 12 years.
At that point you can sell him the flat for £40k, or he will have a £40k deposit to put down against whatever you jointly decide.
If you stop being friends, he will have saved £???
If he cant save, you've protected your investment and given him a home.
liner33 said:
So he is living rent free and has poor credit and no upfront cash ie he can’t afford a mortgage , you won’t be helping him by selling him something he can’t afford
Is that a serious reply??Anyways, I like the other ideas, it was just the end part of selling him it for a pound that worried me (under declaring etc). If that isn’t an issue then I’ll do as suggested.
Thanks all for your input.
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