Vendor Lending Deposit to Buyer

BlueFuzz

Hi there

We have been renting a leasehold flat to the same tenants for the past 5 years. They have een dream occupants and have looked after the porperty well. They always said to us that when we came to sell they would be interested in buying the property if they could. However, now that time has come they do not think they could raise the deposit. This is a shame as on a personal level we'd really like them to have the flat, but also it makes financial sense as we'd save a lot of money on estate agents fees.

We have some equity in the property and part of the reason we are looking to sell is to release some of that equity now. However we do not need all of it now so we were wondering if there was any possibility of using part of the equity to lend our tenant the deposit to buy the flat?

Does anyone out there know if this sort of thing has been done before?

Cheers!

amnblog

Not one for the lenders.

If all you need is to release some equity, why don't you remortgage, and give your tenants some time to put together their deposit?

Presumably, if they were ever going to pay you back there are in a position to save a deposit?

holly_hobby

Yep, vendor gifted deposits are no longer accepted (Halifax being the last to accept these and pulling out some time ago).

So, as above, if you wish to release equity then a simple further advance or remortgage exercise would be the answer (assuming the rental income will support the increased borrowings at 125% of mge interest).

If you wanted to consider an alternative BTL lender, then I would strongly suggest you engage a whole of mkt broker, whom will allow you access to the entire market, including lenders that only accept intermediary introduced business.

Don't forget that any fees incurred in the equity release exercise (classed by HMRC as capital withdrawal) are a permitted tax deduction, as is the interest in relation to the increased borrowings (nowithstanding the ceiling cap of the mge not exceeding the original pch price/value upon entering the business).

Hope this helps

Holly x

BlueFuzz

Hi guys

Thanks for the replies. Remortgage isn't really an option as we've decided we no longer want the hassle of dealing with the management company who own the freehold. Therefore I guess you could say we'd be doing the tenants a disservice anyway by passing that headache onto them!

I'm much clearer as to our options now so thanks again.