Owner Finance - any experience

gmac2304

Does anyone have any experience of owner finance on a property?

We have our heart set on a 4-bed flat in our area - approx. £195k, but we only have 5% deposit.  I have a CCJ that's due to drop off in Jan'21 & 4 defaults, also due to drop off next year.  Hubby's credit report is clean.  Due to the size of our deposit & my poor credit, we're struggling to get a mortgage.  The property we like has been on the market for 2yrs now & has had very little interest.  We've stayed in the street before, so know the pros & cons of staying there.  We contacted the estate agent asking about renting the property with a view to buying next year once my credit worthiness increased, and the owner, an elderly gentleman living in Texas called us back with a proposition - owner finance.  Apparently it's a big thing in the US...  He's offering us a 25yr mortgage @ 2.5%.  I'm struggling to find much info about it in the UK, so thought I would ask on here. 

Anyone got any info on this situation that they're willing to share?

davidmcn

It might make sense to ask him what he thinks he means by "owner finance", as it doesn't mean much to me. At a guess, a private mortgage? What happens if/when your circumstances change during the 25 years? There are enough people posting here about problems happening during 5 year mortgage products.

gmac2304

davidmcn said:

It might make sense to ask him what he thinks he means by "owner finance", as it doesn't mean much to me. At a guess, a private mortgage? 

Yes, a private mortgage.  So, we pay a deposit to him & a pre-arranged amount every month (our 'mortgage' payment) but we will own the deeds to the property, not him.

jamielutz1987

I'm aware of owner finance but have never seen it used in the UK.
It's usually meant as a stepping stone for sub prime borrowers with the expectation that they will build enough equity in the property and improve their credit history to be able to remortgage to a conventional lender in (say) 3-5 years time.
Tbh, 2.5% seems a bit low for this kind of a private mortgage arrangement, what's the %deposit the Texan has in mind?
To be clear, I would be very very wary of these kinds of arrangements, especially when the other party is in another country. But as you will be borrowing and not lending, there's no harm in getting further detail.

With your CCJ and default set to drop off next year, and hopefully the return of more high LTV products to the market, couldn't you just wait it out? The property's been on the market for 2 years, may still be there in another year.

gmac2304

jamielutz1987 said:

With your CCJ and default set to drop off next year, and hopefully the return of more high LTV products to the market, couldn't you just wait it out? The property's been on the market for 2 years, may still be there in another year.

Yeah, this is an option - I just wondered if anyone on here had experience of owner finance in the UK...

davidmcn

gmac2304 said:

jamielutz1987 said:

With your CCJ and default set to drop off next year, and hopefully the return of more high LTV products to the market, couldn't you just wait it out? The property's been on the market for 2 years, may still be there in another year.

Yeah, this is an option - I just wondered if anyone on here had experience of owner finance in the UK...

I think you'll find it's an utterly obscure concept and if you want to go down this road you'll be spending some time thrashing out exactly what the terms are meant to be. Does this guy give the impression he's done it before and if so does he have "off the shelf" documentation available to put it in place?

gmac2304

I think you'll find it's an utterly obscure concept and if you want to go down this road you'll be spending some time thrashing out exactly what the terms are meant to be. Does this guy give the impression he's done it before and if so does he have "off the shelf" documentation available to put it in place?

He hasn’t done it before, he just said it’s popular in the US. He has his UK solicitor dealing with it at the moment, we need to get our own legal advice on the matter. I was just looking to see if I could find my ‘own’ info on it first... 

MovingForwards

The closest you will get over here is a 'private mortgage', usually family lend their relative money to buy a house and a charge is put on the property saying £X is owed to Y and the date it started, like a normal mortgage is secured on the property. The relatives name is put on the title deeds as the owner. 

[Deleted User]

In principle if he is willing to secure a private mortgage to you at 2.5% and take a charge on the property that could work for you. Id be getting my solicitor to check 
1. Can he increase interest rates ?
2. What penalty ( if any) if you want to move and pay off after 4 years ?
3. How would the redemption be calculated ? 

4. What repayments are needed ? ( ie repayment calculated over 25 years ? )