Option to purchase agreement

JHS1983

I am looking to enter into an option to buy agreement with a landlord. Upon completion of the agreed timescales I will be obliged to buy the house or lose the money I have paid on the monthly agreement. When I do go ahead to buy the house at the end of the agreement is it then possible for the landlord to gift 10% deposit towards the house and for me to give a 5% deposit?

Anyone done either of these two agreements to buy a house? Any advice welcome.

DandelionPatrol

JHS1983 wrote: »

I am looking to enter into an option to buy agreement with a landlord. Upon completion of the agreed timescales I will be obliged to buy the house or lose the money I have paid on the monthly agreement. When I do go ahead to buy the house at the end of the agreement is it then possible for the landlord to gift 10% deposit towards the house and for me to give a 5% deposit?

Anyone done either of these two agreements to buy a house? Any advice welcome.

Full of pitfalls.

If the agreement is going to last long enough to be worth 10%, then only a fool of a Landlord would agree to a fixed price. And if the option price is not fixed, the deal is worth nothing. Suppose the deal is for 5 years, and the value of the house at the end of 5 years is £200,000. There is nothing to stop the landlord saying the value of the house is £220,000 and just give back £22,000, making a price of £198,000 - ie a saving of £2,000 on a value of £200,000. Hardly 10%.

And then what happens if you find at the end of the period that you cannot get a mortgage. Or the property is unmortgageable?

JHS1983

Thanks for replying. The value of the property will be set out in the agreement that's signed, along with the monthly payments attributed to the value of the house? I am guessing that would deal with point 1?

2nd point- I'd be taking the risk of losing £20k on monthly payments but I guess I am doing that now through renting. At the end of the period if I can't get a mortgage ( probs unlikely) but if I did then I would have paid the money at a loss but no different to my renting situation now.. . Throwing money down the drain.

And on the last point, the legal aggreement would need to state that if the property is not eligible for a mortgage the contract becomes void?

I don't know if these circumstances are a true reflection so seeking advice.

Either way- renting is dead money anyway?

DandelionPatrol

OK, if the price is agreed up front, you potentially have a good deal. The house should be sold at a discount rather than at full price with a gifted deposit, because that causes less complication on a mortgage.

In your position, I would want the contract looked at by a solicitor. And I would want a mortgage broker to advise on whehter the deal would be acceptable to a lender. And I would want a surveyor to advise on mortgageability of the property before committing.

JHS1983

Yea that's what I thought.

There are mortgage brokers out there who specialise in landlord gifted so would have to go down that route.

Thoughts are gifted 10% desosit £33500 , then over the 2 year period for option to buy the payments of £20k attributed to this so the landlord is only actually gifting £13500 ??? Then a 5 % deposit off me and an 85% mortgage?

Honestly don't know if his is doable but will deffo push it through a solicitor and speak to mortgage advisor.

DandelionPatrol

Make sure your solicitor is advising for an option contract, not a binding contract to buy. You may need to pay the LL a token £1 to make the option valid.

And I repeat, you need an option for a purchase at a discount. Avoid a gifted deposit.

JHS1983

Cheers for the advice. Will contact a solicitor.