First time buyers with no deposit

kajay

Our son and his girlfriend are renting a flat that we own, and paying us rent. We would like to free up some or all of the captial in the flat, and our son and his girlfriend would like to get on the property ladder. The flat is worth approximately £70k. We own the flat with no mortgage on it. Son and girlfriend have no deposit, but both working full time. We wondered how they would go about getting a mortgage on the flat, but as they have no deposit, we would be willing to sell for as much as they can obtain in a mortgage if it were less than 70k, but would want the shortfall back if they sold and made a profit on it in the future. How would this work legally? Is it possible?

Lokolo

They would need a deposit. You won't be able to sell for X-10% and have the lender deal at X.

Best possible move? Stop charging them so much rent so that they can save, or teach them to budget so they can save better.

Nowadays - no deposit, no mortgage.

qazitory

Could you ask them for slighly more rent and put that extra aside for them?

andyp774

My wife and I were in a similar boat in December. We went to the Nationwide and opened a save to buy account. It has to run for a minimum of 6 months and they will offer you a 5% deposit mortgage. Obviously during this time they can save money towards their deposit.

We are only 4 weeks away from applying now. Cant wait as we have found our dream house.

kajay

They have only just moved into the flat, and both on low wages. They also pay a really low rent. They will be trying to save, but we thought that by selling the property to them at a low price now, and paying a mortgage monthly instead of rent would benefit them now and give us access to capital in the property. We were going to sell the flat before they moved into it. We need the capital tied up in it, and they would like to buy. How much deposit on a £60k mortgage would they need to put down? What if we gave them the deposit to be repaid on the future sale of the flat, if a profit made.

ACG

You could release some capital in the property. In 6 months time (mortgages lenders are reluctant to remortgage within 6 months), you could then sell the property to your son.

Some of the capital you release you could gift him as his deposit.

What your trying to do - depending on your sons and his gf's income is potentially doable - however would the repayments be more than rent would? If thats the case could they actually afford to buy it?

It might be worth speaking to a mortgage advisor on this to find lenders without early repayment charges etc.

Dave_Ham

You can sell to them legally at an agreed price below market value. This typically has to be at least 10% and can therefore act as their deposit.

This has to be a gift though and declared as such, but it can be done with them having no deposit...

kajay

Will look into taking a mortgage out on it, and point them in the direction of the save to buy with Nationwide

kajay

Dave Ham. Just seen your post. Will seek advice on what you say too. thanks

Simon_gloster

As Dave says ita can be done as a gifted deposit, as long as a relation is buying, which it is.

All above board and no probs. You'll need to get a solicitor to draw up your interest in the property.

Therefore, if you gift them 10% deposit, they need to get a 90% mortgage (63k). It will have to be a repayment mortgage also.

To go further, if you gift thwm 15%, you'll be amazed how much better the rates will be for them. Full steam ahead methinks!!!

Thrugelmir

kajay wrote: »

but would want the shortfall back if they sold and made a profit on it in the future. How would this work legally? Is it possible?

If you gift the deposit , then enforcing a clawback clause could be difficult.

To protect the deposit. A declaration of trust should be drawn up naming your son to receive the amount gifted.