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Buying a unique property with a private mortgage
![[Deleted User]](https://us-noi.v-cdn.net/6031891/uploads/defaultavatar/nFA7H6UNOO0N5.jpg)
[Deleted User]
Posts: 0 Newbie
Hi,
TLDR:
I was not looking to buy a property but after a series of unexpected issues with my visa in the UK, I ended up in an Airbnb that was awesome. The property was a 1 bedroom 'special conversion' at the top of a relatively well known building near central London. I've never stayed in such a unique place before - it's the type of place when anyone walks in for the first time comments at how cool it is. The landlord was Airbnbing it as he was in financial difficulty. He said I could stay on at a relatively high per night price off Airbnb, and I agreed as I just loved the place so much.
It has now been a year and we've been doing a very flexible arrangement where I basically tell him when I want to stay (I travel a lot for work), I then pay him per night. Otherwise he stays here or he Airbnbs it (or tries to). He has always blocked it on Airbnb when I stay I want to stay and he's been super nice. Late last year I was hoping for a large influx of cash and the only thing I could think to buy was this place. I asked if he wanted to sell it and he said probably not. But then earlier this year he said he was keen to sell and put me under pressure to decide if I want it, as he wanted to raise funds through sale of property to move abroad. We met and discussed options and I spoke to 6 mortgage brokers. We signed an exclusivity agreement whereby I now have exclusive right to buy the property up to a maximum price and continue the 'rental' agreement until August this year.
Then the virus hit and all plans have been pushed later and he is not able to move abroad as fast. It also came to light that the building has issues with mortgages due to Grenfell tower regulations on flammable materials. Apparently, just some materials need to be taken out of the tower but that also seems to be pushed back. As such, I do not think it is possible to get a mortgage on any flats in the tower though I may be wrong. The particular apartment has some other issues because its so unique and something to do with access to elevator, you have to get a non high street mortgage provider though in my search I found that not to be true (well none of the banks came to take a look at the property). I also spoke to the original architect of the apartment who stated it was not an issue.
In addition there have been some odd security issues on the tower that I won't go into detail about, but they are not a deal breaker. However with all factors, I think the landlord is willing to go down significantly on price below his purchase price.
I am about to make a proposal now on purchase price, interest rate with HIM 'loaning' me the money to buy the place, ie I'd essentially be switching from paying 'rent' to paying interest installments to him. The only hitch up is I am confused at what point he can hand over 100% of the deed to me. Obviously that would be ideal and the simplest: He gives me 100% of the property via deeds, we have a legal contract which states I owe him the property price + interest, and we cover all the fine print. I do a lot of legal work in my job and have drawn up many custom agreements so am comfortable with this.
The only big problem now is he already has a mortgage on the property of 164k and no income to really pay it off. I think a compromise would be that I take (500-164)/500 = 67% of the property, and then pay him 'interest' on 67% of the purchase price of the property and my installments towards that portion of the mortgage first go to HIS mortgage of 164k, until its paid off and then 100% is owed by me. I then continue to pay off the remainder of the 67%.
That's a bit complicated, another way would be I just take 100% of the property and pay him back + interest for 100% of the purchase price, and he pays off his mortgage first.
I am not sure if these options require approval of his current mortgage provider.
Failing that, I guess we could both 'share' his 164k mortgage and I take 100% of the property but no idea how that would work.
Any advice on how to deal with this 164k would be appreciated.
TLDR:
- Want to buy a property for 500k, where landlord has a 164k mortgage on it still
- Want to buy directly from the landlord and have a private mortgage where I repay him at a low interest rate but in 'chunks' where possible
- Unclear if we can do this without agreement from his mortgage provider
- Would prefer to take 100% ownership of the property, but then assume the risk of his mortgage would be passed on to me
- Worried about speaking to his mortgage provider as they may not allow it
I was not looking to buy a property but after a series of unexpected issues with my visa in the UK, I ended up in an Airbnb that was awesome. The property was a 1 bedroom 'special conversion' at the top of a relatively well known building near central London. I've never stayed in such a unique place before - it's the type of place when anyone walks in for the first time comments at how cool it is. The landlord was Airbnbing it as he was in financial difficulty. He said I could stay on at a relatively high per night price off Airbnb, and I agreed as I just loved the place so much.
It has now been a year and we've been doing a very flexible arrangement where I basically tell him when I want to stay (I travel a lot for work), I then pay him per night. Otherwise he stays here or he Airbnbs it (or tries to). He has always blocked it on Airbnb when I stay I want to stay and he's been super nice. Late last year I was hoping for a large influx of cash and the only thing I could think to buy was this place. I asked if he wanted to sell it and he said probably not. But then earlier this year he said he was keen to sell and put me under pressure to decide if I want it, as he wanted to raise funds through sale of property to move abroad. We met and discussed options and I spoke to 6 mortgage brokers. We signed an exclusivity agreement whereby I now have exclusive right to buy the property up to a maximum price and continue the 'rental' agreement until August this year.
Then the virus hit and all plans have been pushed later and he is not able to move abroad as fast. It also came to light that the building has issues with mortgages due to Grenfell tower regulations on flammable materials. Apparently, just some materials need to be taken out of the tower but that also seems to be pushed back. As such, I do not think it is possible to get a mortgage on any flats in the tower though I may be wrong. The particular apartment has some other issues because its so unique and something to do with access to elevator, you have to get a non high street mortgage provider though in my search I found that not to be true (well none of the banks came to take a look at the property). I also spoke to the original architect of the apartment who stated it was not an issue.
In addition there have been some odd security issues on the tower that I won't go into detail about, but they are not a deal breaker. However with all factors, I think the landlord is willing to go down significantly on price below his purchase price.
I am about to make a proposal now on purchase price, interest rate with HIM 'loaning' me the money to buy the place, ie I'd essentially be switching from paying 'rent' to paying interest installments to him. The only hitch up is I am confused at what point he can hand over 100% of the deed to me. Obviously that would be ideal and the simplest: He gives me 100% of the property via deeds, we have a legal contract which states I owe him the property price + interest, and we cover all the fine print. I do a lot of legal work in my job and have drawn up many custom agreements so am comfortable with this.
The only big problem now is he already has a mortgage on the property of 164k and no income to really pay it off. I think a compromise would be that I take (500-164)/500 = 67% of the property, and then pay him 'interest' on 67% of the purchase price of the property and my installments towards that portion of the mortgage first go to HIS mortgage of 164k, until its paid off and then 100% is owed by me. I then continue to pay off the remainder of the 67%.
That's a bit complicated, another way would be I just take 100% of the property and pay him back + interest for 100% of the purchase price, and he pays off his mortgage first.
I am not sure if these options require approval of his current mortgage provider.
Failing that, I guess we could both 'share' his 164k mortgage and I take 100% of the property but no idea how that would work.
Any advice on how to deal with this 164k would be appreciated.
0
Comments
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Why are you so keen to buy a "cool" property if it's generally viewed as being at risk of becoming too "hot"?
Your suggested plan really isn't going to work, you can't buy a property and leave the seller's mortgage in place. You'd need to find the money somewhere else (or get them to slash the price).0 -
One word. Unworkable.0
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What do you mean by "hot"? The property is clearly sellable/buyable, it has been sold to the current landlord once before by a high end agency, and received 4 offers after 7 people viewed it. The issues with the mortgage on the building are unclear but would affect hundreds of people, so is quite clear they are fixing that. I'm keen to buy it because it's a great place.davidmcn said:Why are you so keen to buy a "cool" property if it's generally viewed as being at risk of becoming too "hot"?
Your suggested plan really isn't going to work, you can't buy a property and leave the seller's mortgage in place. You'd need to find the money somewhere else (or get them to slash the price).
Get the sellers mortgage provider, or the seller to slash the price?0 -
The burny cladding issue which is making the property unmortgageable - and therefore not "clearly sellable/buyable" other than to cash buyers. And you're not a cash buyer, because you don't have enough cash.moolriaz said:
What do you mean by "hot"? The property is clearly sellable/buyabledavidmcn said:Why are you so keen to buy a "cool" property if it's generally viewed as being at risk of becoming too "hot"?
Your suggested plan really isn't going to work, you can't buy a property and leave the seller's mortgage in place. You'd need to find the money somewhere else (or get them to slash the price).1 -
Ah - I haven't had a mortgage provider raise this. I heard through the grapevine that it had been a problem for other tenants. AS such the building management was set to remove all the material last month. It's basically some wooden tiles on every 2nd floor - a job that can be done in 2 days. This was delayed because of the virus. As such it is a temporary issue that obviously affects many residents so it would be sorted within the next 3-6 months.davidmcn said:
The burny cladding issue which is making the property unmortgageable - and therefore not "clearly sellable/buyable" other than to cash buyers. And you're not a cash buyer, because you don't have enough cash.moolriaz said:
What do you mean by "hot"? The property is clearly sellable/buyabledavidmcn said:Why are you so keen to buy a "cool" property if it's generally viewed as being at risk of becoming too "hot"?
Your suggested plan really isn't going to work, you can't buy a property and leave the seller's mortgage in place. You'd need to find the money somewhere else (or get them to slash the price).
I am getting a mortgage from the landlord directly, I am not trying to get a high street lender. This is known as a 'private mortgage' and used to be common back in the day, and is still common in countries like France.
0 -
I wouldn't rush in, no-one knows what property prices are about to do.
At some point you'll need a solicitor (for a declaration of trust maybe) if you'll be owning the property but someone else, ie the sellers bank, owns a chunk of the property. May as well get chatting to that solicitor now, rather than your peer group here.0 -
A private mortgage is fine in principle, the problem is your suggestion that he can't afford to pay off his existing mortgage simultaneously with the sale to you. That's what makes the idea unworkable.moolriaz said:
I am getting a mortgage from the landlord directly, I am not trying to get a high street lender. This is known as a 'private mortgage' and used to be common back in the day, and is still common in countries like France.davidmcn said:
The burny cladding issue which is making the property unmortgageable - and therefore not "clearly sellable/buyable" other than to cash buyers. And you're not a cash buyer, because you don't have enough cash.moolriaz said:
What do you mean by "hot"? The property is clearly sellable/buyabledavidmcn said:Why are you so keen to buy a "cool" property if it's generally viewed as being at risk of becoming too "hot"?
Your suggested plan really isn't going to work, you can't buy a property and leave the seller's mortgage in place. You'd need to find the money somewhere else (or get them to slash the price).3 -
The seller's mortgage lender does not own a chunk of the property. The mortgage lender doesn't own any of the property and never has, that's not how mortgages work.snickpan said:I wouldn't rush in, no-one knows what property prices are about to do.
At some point you'll need a solicitor (for a declaration of trust maybe) if you'll be owning the property but someone else, ie the sellers bank, owns a chunk of the property. May as well get chatting to that solicitor now, rather than your peer group here.1 -
If he sells the property, of course his lender is going to want their £165k back. They have no security left.moolriaz said:Hi,
TLDR:- Want to buy a property for 500k, where landlord has a 164k mortgage on it still
- Want to buy directly from the landlord and have a private mortgage where I repay him at a low interest rate but in 'chunks' where possible
- Unclear if we can do this without agreement from his mortgage provider
- Would prefer to take 100% ownership of the property, but then assume the risk of his mortgage would be passed on to me
- Worried about speaking to his mortgage provider as they may not allow it
If he sells part of the property, of course his lender is going to want a joint-owner-joint-borrower mortgage. Anything else makes repossession very difficult.
He can, of course, lend you however much money he feels he wants to lend you at whatever interest rate he wants to charge you over whatever period he wants. But why on earth he'd do that, at a rate less than you'd get from a normal mortgage lender, I have no idea.
Why can't/won't you just borrow the money normally?0 -
oh right, thank you. But something about the sellers name on the deeds, if he still has the mortgage? It will need some legal interaction anyway, so buyer may as well start off on the legal path now
0
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