By to Let with no deposit

stevedrink

I'm trying to help my step son and family get on the property ladder, is this possible without deposit ?

Was looking at getting a loan for 12000 over the longest period possible as the deposit, mortage on three year fixed for 70000 ish.

After 3 yrs, remortgage and pay loan and then just have mortgage for 82000 ish on house worth hopefully 20% more than I pay for it.

Does anybody know if this has any major drawbacks and can anybody recommend a loan that allows unsecured over say 10yrs (to keep the payments down). Would need to be able to pay the loan off without any penalties.

Somebody also mentioned a deed of gift as a way of getting 5% of the deposit, can anybody explain this....?

Thanks for the advise.

silvercar

Your whole strategy depends on house prices rising. If they don't your stuck with the unsecured loan. If they fall, you have a negative equity rpoblem, making remortgaging difficult.

Deed of gift is where the seller offers you a gift of 5% on completion. So a house valued at £95k is sold at £100k with a gift of £5k on completion. In theory it allows you to quote £100k as the buying price in order to help your mortgage situation. It is often offered by developers on new properties. It doesn't always work, particularly if the valuation comes in low.

Lighteater

They could instead go into a lease option arrangement.

Here, they would go into a property as tenants. However, on top of the usual rent, they'd pay an amount on top - maybe 30-50% - which goes to the owner as small payments towards the deposit.

Meanwhile, your step-son has the duration of the option agreement - typically 2-3 years - to add value to the house, or to just wait and hope for capital appreciation over that time.

When the agreement is up, he has the option (NOT the obligation) to complete on the purchase. His deposit will have been paid over the two years, the house will hopefully be worth more than the price fixed at the start, and he'll be able to get a mortgage without having to borrow over and above that.

RHemmings

Lighteater wrote:

They could instead go into a lease option arrangement.

Here, they would go into a property as tenants. However, on top of the usual rent, they'd pay an amount on top - maybe 30-50% - which goes to the owner as small payments towards the deposit.

Meanwhile, your step-son has the duration of the option agreement - typically 2-3 years - to add value to the house, or to just wait and hope for capital appreciation over that time.

When the agreement is up, he has the option (NOT the obligation) to complete on the purchase. His deposit will have been paid over the two years, the house will hopefully be worth more than the price fixed at the start, and he'll be able to get a mortgage without having to borrow over and above that.

If he then decides not to go ahead, does he then lose the deposit. Things will be fine if the house value has gone up, and he can then buy a "bargain". But if house prices have gone down, then he'd lose out considerably.

And, what about a mortgage? What if interest rates are much higher at the end of the agreement? Or if banks are insisting on larger deposits, or credit has been tightened in some other way? Then perhaps he couldn't go ahead.

Sounds quite risky to me.

hot_chick_2

Please don't go ahead with this crazy scheme.

Interest Rates are going up and property prices are starting to ease and will soon come down.

Wait till you or your son have a decent deposit and buy in a few years time at the bottom of the market.Otherwise you will end up in negative equity for years to come.

Follow the Moneysaving tips and get saving.