Thoughts on how to structure a deal please

by Readers Question

10:16 AM, 2nd May 2014
About 7 years ago

Thoughts on how to structure a deal please

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Thoughts on how to structure a deal please

Someone in my village I know vaguely came to see me as he knows I am a landlord.  He is 63 and has a mortgage on his house that runs to age 65 and is interest only. He has no means of repaying it having lost his job a while ago to redundancy and has taken a lower paid job at about £22,000. Thoughts on how to structure a deal please

I’ve looked the house up – he bought it in 2003 for £180,000 and owes about £145,000 on it. It is in his name only. He thought it would be worth about £250k but knows if he sells that although he will have £70k he thinks he probably won’t be able to buy anything else (he wants to stay in the village). I suspect he pays about £600 per month.

The property is a bungalow with quite a bit of land around it, I haven’t seen it apart from at a distance.

As I see it some ideas might be –

1) Get a lifetime mortgage. Are these still available? Ive just been reading about this and it looks almost impossible on affordability.

2) Sell and use the cash to rent somewhere assuming it will last long enough

3) Sell and invest the money in something that will produce income to pay rent (eg lend it to me to buy property with a 10% rate of return)

4) Sell to me at below full market value and stay there for life at an agreed rent – that way he gets a lump sum too. This would be my preferred option as he gets to stay in his home but can I afford to accept less than interest rate if I do a 70/30 mortgage but might that go wrong later on.

Any other ideas welcome.

He has a daughter who says she doesn’t want anything from the house.

Thanks

Sue


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Comments

Mark Smith (Barrister-At-Law)

10:20 AM, 2nd May 2014
About 7 years ago

I would be happy to advise on the contractual aspects however you decide to proceed.

Best of luck.

Mark Alexander

10:28 AM, 2nd May 2014
About 7 years ago

Hi Sue

Lifetime mortgages are still available but will not work for this gentleman in the scenario you have described due to his LTV being too high.

Sale and rent back is probably a none starter too on the basis that it is now so highly regulated. If you do the deal you have in mind without proper FCA authorisation then you will be committing a crime!

The best thing for this gentleman to do is sell and rent or sell and buy a cheap retirement flat where he may be able to meet the LTV requirements for a lifetime mortgage.

Another option might be for you to buy a property for him to rent from you on the basis that he sells his property and lends you the money for the deposit, perhaps even interest free on the basis that you will agree a reduced rent for him. Your mortgage lender will not allow you to give him a long term tenancy but they can't stop you giving him a Deed of Assurance - see >>> http://www.property118.com/deed-of-assurance-1/32440/

The Deed of Assurance could be structured on the basis that if you evict him from the property within X number of years, on any basis other that him being in breach of the tenancy, then he gets his loan money back.

If you would like to discuss this structure in more detail I do offer a Consultancy service, please see >>> http://www.property118.com/consultancy-mark-alexander/61522/
.

John Perry

13:03 PM, 2nd May 2014
About 7 years ago

Has he spoken to his lender to see if they will extend the term of the mortgage?

Rob

23:07 PM, 2nd May 2014
About 7 years ago

Could you buy some of the land off him and build on it?

Sue Whittle

11:36 AM, 3rd May 2014
About 7 years ago

thanks everyone lots of food for thought, some great ideas Im determined to do somthing so watch this space! The idea of me buying and of the land purchase are great ta


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