Not having a deposit for a house, does this work?

[Andyjc86]

I might have the opportunity to buy my first house, however I don't have a deposit. The house is owned by my dad on a buy-to-let mortgage. It is worth £225k, but he has said I can have it for £185k (what he bought it for).

He seems to think that the £40k difference in value to purchase price can be used as a deposit. I think he's wrong and the idea is a no go. Surely i need to add cash to the equation ie 15% (£27,750 yikes!!) Before I start to getting my hopes up can someone confirm who is correct. Thanks

[Sarnie]

Andyjc86 said:

I might have the opportunity to buy my first house, however I don't have a deposit. The house is owned by my dad on a buy-to-let mortgage. It is worth £225k, but he has said I can have it for £185k (what he bought it for).

He seems to think that the £40k difference in value to purchase price can be used as a deposit. I think he's wrong and the idea is a no go. Surely i need to add cash to the equation ie 15% (£27,750 yikes!!) Before I start to getting my hopes up can someone confirm who is correct. Thanks

This can be done, I've done one recently, it's called Gifted Equity.

It's not entirely simple as not all lenders will accept Gifted Equity, drop me a PM if you want some help with this.

[Steffan]

Sarnie said:

Andyjc86 said:

I might have the opportunity to buy my first house, however I don't have a deposit. The house is owned by my dad on a buy-to-let mortgage. It is worth £225k, but he has said I can have it for £185k (what he bought it for).

He seems to think that the £40k difference in value to purchase price can be used as a deposit. I think he's wrong and the idea is a no go. Surely i need to add cash to the equation ie 15% (£27,750 yikes!!) Before I start to getting my hopes up can someone confirm who is correct. Thanks

This can be done, I've done one recently, it's called Gifted Equity.

It's not entirely simple as not all lenders will accept Gifted Equity, drop me a PM if you want some help with this.

From the comments of others it would seem that Sarnie knows his stuff on this. It is a relatively straightforward process and there are lenders who will consider this process. However there are also lenders who will not. Good luck to you and I do hope it works out.

[Andyjc86]

Thanks , I'll look into it

Next stumbling block, 18 months of being self employed

[Sarnie]

Andyjc86 said:

Thanks , I'll look into it

Next stumbling block, 18 months of being self employed

Ouch......so the lack of deposit wasn't the real stumbling block

Still not totally dead in the water though.....

[jonny70]

Sarnie said:

Ouch......so the lack of deposit wasn't the real stumbling block

Still not totally dead in the water though.....

Without invading this thread. whats the minium you can get away with being self employed if you have 25/30% deposit ?

[Andyjc86]

Hmmmm so it seems 3 years books are required as a rule of thumb. If I can't find another way then I'll see if he can't wait a little while longer

[Sarnie]

jonny70 said:

Without invading this thread. whats the minium you can get away with being self employed if you have 25/30% deposit ?

Minimum 12 months, but it does depend on a whole host other criteria....

[jonny70]

Sarnie said:

Minimum 12 months, but it does depend on a whole host other criteria....

such as?

[Sarnie]

Andyjc86 said:

Hmmmm so it seems 3 years books are required as a rule of thumb. If I can't find another way then I'll see if he can't wait a little while longer

You don't need three years. Two years preferably, even one years is possible............

[malks222]

Sorry to hijack the thread, but seems like people in here know there stuff, let me know if this sounds do-able/acheivable:

house up for sale @ £139,000, after speaking to the agent I know they would accept £135,000. however I am not in a position to buy with no deposit and having been contracting/just set up limited company in the last 6 months etc.... and the owner of the property is now looking to rent the place out as its been up for sale for 6 months with no interest.

I spoke to the agent and he thinks the current owner would happily rent it to me for 12/24months with a view to buy at the end of the period. but what i'm wanting to do is get a price agreed to buy it after the 12 or 24months rent.

he wants £600/month rent, so I'm proposing that if i rent for 12months, I would be able to buy the property for £130,00 or after 24months £125,000. this is a discount of about 70% on the value of the rent. does this sound like it would be possible? or is the seller liable to just say no, rent it for 12/24months and i still want the full amount.

also if i was able to buy the property after the renting period, what would happen with mortgages, do i need 80/90% of the full property price (eg 80% of the £135,000, meaning i've already paid a chunk of the deposit) or would it be 80/90% of the purchase price (eg 80% of the £125/130,000)

sorry its a bit long, but i'm quite new to all this and looking at my best options. also saving up for the deposit while renting is not an issue, so will be able to afford to buy after the 12 or 24 months

[scottri]

malks222 said:

Sorry to hijack the thread, but seems like people in here know there stuff, let me know if this sounds do-able/acheivable:

house up for sale @ £139,000, after speaking to the agent I know they would accept £135,000. however I am not in a position to buy with no deposit and having been contracting/just set up limited company in the last 6 months etc.... and the owner of the property is now looking to rent the place out as its been up for sale for 6 months with no interest.

I spoke to the agent and he thinks the current owner would happily rent it to me for 12/24months with a view to buy at the end of the period. but what i'm wanting to do is get a price agreed to buy it after the 12 or 24months rent.

he wants £600/month rent, so I'm proposing that if i rent for 12months, I would be able to buy the property for £130,00 or after 24months £125,000. this is a discount of about 70% on the value of the rent. does this sound like it would be possible? or is the seller liable to just say no, rent it for 12/24months and i still want the full amount.

also if i was able to buy the property after the renting period, what would happen with mortgages, do i need 80/90% of the full property price (eg 80% of the £135,000, meaning i've already paid a chunk of the deposit) or would it be 80/90% of the purchase price (eg 80% of the £125/130,000)

sorry its a bit long, but i'm quite new to all this and looking at my best options. also saving up for the deposit while renting is not an issue, so will be able to afford to buy after the 12 or 24 months

I can't see why a seller would agree to this unless he couldn't find someone to rent it out to, or thought that the market was going to drop. If it were me I'd just rent to someone else and re-market at the end of that period and not lose £7-14k. (All assuming the marketed price is reasonable)

[Sarnie]

scottri said:

I can't see why a seller would agree to this unless he couldn't find someone to rent it out to, or thought that the market was going to drop. If it were me I'd just rent to someone else and re-market at the end of that period and not lose £7-14k. (All assuming the marketed price is reasonable)

+1 No benefit to the vendor, he'd be better off slashing the rent and renting it to someone else.

Even if he agreed to do it, for mortgage purposes, the purchase price would be the figure used once he had discounted the rent, so it wouldn't get included as your deposit.

[surfymark]

You are essentially talking about a Lease Option.

Normally you would agree a price before the start of the agreement but it is usually higher than the current value (although usually a Lease Option is 10-15 years in length).

HTH
M