Confused Rent/Buy Proposal

KaS_2

My house is up for sale but as things are slow I'm considering renting. My brother would like to rent my house for now and then buy when he can afford the deposit for mortgage. He came up with a proposal that I'm confused about.
He suggests that the rent he pays me comes off the price of the house and at the end of three years he can then get a mortgage for the remaining balance. I can't quite see this working.
Any advice please from some financial brains out there?
KaS

birduk

Family + Money = Bad mix.

Sounds like your brother will get a really good deal out of this. I wish my rent went into my deposit!

nervousmother

I see lots of problems, firstly with renting to family. Keep the house as a business and use a letting agents. You can tell them you want your brother in.
Secondly if you go for this deal, in 3 years your house maybe worth more than it is now would you be happy to except todays prices?
Would you be happy knocking the rent off the final price? do you pay a mortgage? you would be loosing out money, the rent he pays I presume would pay the mortgage, only part of that payment would come off the capital loan as the majority would be interest, basically he would be living there rent free in the long run... It is all in his interest and not yours. be careful.

sarah_elton

So... Doesn't that mean he'd actually be living there rent free for three years?

What happens if he decides not to buy it at the end of three years?

Also, what if prices have dropped a lot? Are you agreeing a price with him today? If so, what will you do if he says he'll pay you £20k less after the three years are up?

Personally, I'd run a mile. If you brother wants to buy now, fair enough. This sort of deal could cause all sorts of problems in the future thought.

If you go ahead, get a solicitor's advice and have it all drawn up as a formal contract, which includes exit penalties for either party if they want to call off the deal. Make sure that before either of you sign, you know exactly what will happen if something goes wrong. If it's all agreed up front, you shouldn't have a major family blow-up later on.

mlz1413

I guess your brother isn't paying rent to live anywhere at the minute if he believes that by paying rent it all acts as deposit!

Renting is a renting, buying is buying, if you want to rent your house you charge a rent per month for it, have a deposit, contract and inventory drawn up. If your brother wants to rent the house for the amount you need to charge per month then he rents it and pays the costs.

Then if in a few years time if he wishes to buy you agree to get valuations done and make arrangements for purchase at that point.

As others have said what if either of you need to change plans during those 3 years.

If your brother feels his rent is doing you a favour then you are best not to accept the rent.

KaS_2

Thanks to all of you. It was more or less what I thought.