Tenant cannot quite raise enough to buy their home?

Tenant cannot quite raise enough to buy their home?

10:20 AM, 12th May 2022, About 2 years ago 15

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Hi everyone, We have a very good tenant of nearly 13 years standing.

However, we would now like to sell the house and the tenants would like to buy the property which is their home.

The maximum mortgage they can get is about £40,000 or ca. 25% under the market value of the property.

I have already signalled to the tenants my willingness to give them up to a £10,000 discount.

Does anyone have any ideas about how to bridge a small gap in funding so I can do everything I can to make sure the tenants stay on in their home?

Many thanks


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11:00 AM, 12th May 2022, About 2 years ago

It may be slightly complicated but you could loan them the money and yake 2nd charge on the property and they can laybyou over a number of years.
You would have to get a credit licence if you charged interest ir if you charged a bit more and disnt add interest i dont rhink you would need to register ) only guessing i al not sure)

Judith Wordsworth

11:02 AM, 12th May 2022, About 2 years ago

Only thought would be a shared equity ie x% is retained by you. But not sure if they would then get a mortgage


11:07 AM, 12th May 2022, About 2 years ago

£40,000 = 75%, that is 25% short of 100%?
Divide £40k by 3, then X 4 = (100%) £53,333r?
The difference is c.£13,000. You have offered a discount of £10,000, reducing the old 100% to £43,000? If my basic sums are right, you are so near touching distance you can shake hands?
Old tenants can buy the beer.

Accidental LL

12:27 PM, 12th May 2022, About 2 years ago

If your tenant is of an age to get equity release lifetime mortgage they could buy without making payments on the mortgage which would provide the cash shortfall without you contributing.

Equity release can be provided at the time of a purchase completion.

I did this 2 1/2 years ago.

A great plus would also be your tenant could stay undisturbed.

northern landlord

12:48 PM, 12th May 2022, About 2 years ago

Many landlords would like to sell up for a variety of reasons. Many tenants pay rent amounts that would be comparable to mortgage payments. I have long thought that there should be some sort of help to buy (not right to buy) scheme to assist tenants who could pay the mortgage but don’t have the deposit. Landlords would benefit from no estate agent fees and the tenant would benefit from having no moving and setting up house costs. Capital gains tax rules could be changed where a sale is made to a long standing tenant. The landlord could opt to pay the tax (which they would have to pay anyway) in the form of a discount to the tenant instead of handing cash over to HMRC. Also selling to a tenant could offer a way for landlords to escape the cost of EPC upgrades as once the rented house becomes an owner occupied house the new rules would not apply.
I am surprised that some financial institutions have not come up with a suitable scheme (maybe they have?) the biggest hurdle would be the Government giving up the capital gains tax to help fund a discount. Not all tenants could benefit, it would not help those in receipt of benefits as a lot of these would be lost if tenants became owners but it could help many who are just on the cusp of buying their own place, who like where they live and just need a bit of help over the line. Landlords are not charities but I am sure if it was easy and convenient to sell to a good tenant many would be willing to accept lower offers.


13:54 PM, 12th May 2022, About 2 years ago

Reply to the comment left by northern landlord at 12/05/2022 - 12:48
I’ve also been thinking this. If all rental payments went into the tenant’s credit score then it would show the mortgage companies that they have been reliable payers at a rate in excess of the mortgage alone. This has to be a good thing!

(Would also show us the good and potentially poor tenants at referencing).

Simon M

18:04 PM, 12th May 2022, About 2 years ago

Reply to the comment left by Blodwyn at 12/05/2022 - 11:07
It would help to have this clarified. It could also mean mortgage leaves £40K is 25% of the property? If so:
Price = £160K, assuming max mortgage = £120K
On a 4x or 5x multiple, tenant income £24K - £20Kpa
Discount £10K = £30K to find.
This would mean borrowing an extra 25% which isn't a small increase, and becomes higher risk.
A deposit would reduce both mortgage & income.


18:40 PM, 12th May 2022, About 2 years ago

I have been wondering about this for some years. Whether there could be some kind of shared ownership appropriate to one-off arrangments between landlord and a tenant who wishes to buy but can't afford market rent. Obviously complex and lots to pin down in a contract... I think there could also be a some kind of reduction in the amount of capital gains a landlord selling to a tenant would pay (wishful thinking) but I like the idea that whatever the CGT would be, it goes to a deposit for the tenant. Perhaps one that will eventually be repaid when the tenant/owner eventually owns outright and sells.

Tim Rogers

20:09 PM, 12th May 2022, About 2 years ago

Tangential question, where do landlords stand re CGT if they're selling to their tenant? I have a vague memory that it was floated that CGT would not be applicable, but I don't know what happened about that.

Ann Price

8:38 AM, 13th May 2022, About 2 years ago

Remember that any property sold at a discount is still subject to capital gains tax at the full market rate. This came as an unpleasant surprise. Prior knowledge would not have changed my decision, but it was a shock.

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