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  • Buy-to-Let

    Tenant wants buy my property but no deposit!

    Hi,

    My tenant is very keen to buy my property where she has been living for 9 years but she has not enough money for the deposit... she can get a mortgage but she is short of £25K with the deposit, please what would you do in her position....?I am very keen to help her but I don't know how.... 

    Thank you for your help 

    Regards 

    Sandro Medda
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    I have been offered the same dilemma.    The property in question is a bit out of my area, so i'm interested as I won't sell on when I have  in situ tenants but have 3 outside my area that will go one day when tenants leave.

    Problem.   I spoke with a broker.   I'd happily gift free 5%off market value.  Their parents semi is for sale next door so value easy to work out.  Problem is the only lender that will allow this is Halifax that will only allow a minimum gift of 10% from landlord.

    Value is 90k,   I am offering 4.5k free, but Halifax insists I offer 9k free.   This is like the govermnent.   So sorry, NO.  They can become homeowners, I'll help them, but I am not their parents so am not giving my kids future away.


    You couldn't make it up.  I want to offer strangers a FREE 4.5 K but it's not enough.


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    If the mortgage company is so stuck in their way, what will happen if you increase the asking price which 5% and gave a “10”% discount.  I think some of it might come out in the wash when the survey is done, but 5% can sometimes be hidden!
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    Dear Paul,

    Thank you very much for your help

    Best Regards

    Sandro

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    I tried exactly the same thing. £5,000 towards the deposit and the tenants vacated the property and moved in with their parents to try and save the £5,000 up. Since then the properties have risen the  same amount. I and everyone involved were left shaking our heads in disbelief. To add to that I had to physically pay her the £5,000 upfront but luckily enough she did return it.
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    Oh hang on, I'm maybe being a bit harsh here .  Maybe I should give a free 10 %discount as they've rented off me for a few years and should benefit if thet price of the house has gone up, but of course have no penalty if the price of the house goes down.


    After all, I've bought groceries from Tesco for 20 years and get a 10% discount on Tesco shares if  I want to buy them, but don't have to top up if  they fall in value.


    Hang on,   Actually, I asked Tesco that and was told to BOG OFF.  Funny that.

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    Hang on a minute, if short for the deposit just exchange and complete on the same day then no deposit is needed. Unless of course you mean she is short 25k to buy the property then that's a different matter.

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    Hi Sandro,

    Lending on a residence or offering "vendor finance" is a regulated activity and therefore you cannot undertake it.

    If a "gifted deposit" is in the mix, and it must be disclosed to the lender, then the valuer will simply down-value the property by the same amount as the gifted deposit.

    Gifted deposits are a thing of the past imho.

    People purchasing a property need the required deposit and they also need to show the lender where those funds have come from.  Any form of non-disclosure is tantamount to mortgage fraud.

    Therefore, selling to a tenant who cannot raise the deposit is a complete non-starter unless you go down the "rent to buy" route where the tenant pays a higher rent each month with a portion of the rent going into a separate account as part of their deposit when they can finally buy, but that is fraught with pitfalls and also involves vendor finance.

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    Dear Vanessa,

    Thank you very much for your kind answer

    Best Regards

    Sandro

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    The tenant needs to save. It would be an accounting nightmare to give a discount on rent for next few years as what if they pocketed the money and decided not to buy. If there is a spare room you could offer to let them rent it out as long as it didn’t contravene any lease of it is leasehold or any HMO guidance in your area. 

    We had some tenants who wanted to buy but they were clearly never going to save as they preferred to buy s new car every two years and pay £150 a month for Sky - I wasn’t prepared to help them out. 

    I did help out the young family who were nurses at the local hospital and whilst they couldn’t afford our property I helped them put money away by giving written permission for them rent the spare room, recording their rent so their credit rating improved and paying the difference on the insurance for the property as a result.
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