Can I supply a mortgage?

[blueash]

I have a tenant that would like to buy the flat he rents from me, I own it outright there is no mortgage on it. Can we make it so that he carries on paying me so that I still receive an income rather than him getting a mortgage from somewhere else? If I sell it outright and invest they money it will not give me the income I get now. In the USA this is common I am told but I have no idea how to structure it or if it is even legal.

[Gordon999]

If you own the property, you can rent it and receive the income.

If you sell, you do not own the property and cannot demand rental income. If you sell, you may also become liable to capital gains tax .

You can consider applying the proceeds from sale to buy another property in a better location.

[jpkeates]

If you are in the UK, mortgage lending is a regulated activity, so no you can't provide a mortgage.

You could loan the person the money to buy your property, but it would be a loan and not a mortgage.
And you wouldn't have the direct claim on the property that a mortgage lender would have.

[nukecad]

There is nothing in what you propose for the tenant - why should he keep paying you rent and getting nothing back when he could buy it from you and 'own' the property (subject to any mortgage he gets from a regulated mortgage lender)?

If you are not willing to sell then say so, and he'll most likely buy somewhere else and you'll need to find a new tenant.

[blueash]

nukecad,

What is in it for the tenant is that he does not have to find a deposit - anyway it turns out I would not be able to give him a mortgage anyway since it is a regulated industry.

[blueash]

Thanks everyone - not happening then!

[ash72]

I think you meant, was that you sell your property to your T, instead of them paying you rental income (which your not entitled to as you no longer own the property) the T pays you an agreed amount in the form of capital and interest instead of rent. I'm sure a carefully drafted contract could be created, you would need to be able to make a charge on the property in the event the T sells it without you knowing and running away.

[Mrs Mug]

Does the tenant know that as the owner of the flat, that he would have to pay service charges and ground rent, on top of his payments to you?

[Sydaton]

What is in it for the tenant is that he does not have to find a deposit - anyway it turns out I would not be able to give him a mortgage anyway since it is a regulated industry.

It is a regulated industry but that doesn't stop individuals loaning money in the situation you describe and you can have the same charge over the property that a bank would have. You do however have to follow certain regulations that you can see online.

Having said that you have 2 issues:

a) you have to be happy that the return you are getting is enough for you bearing in mind that you obviously don't get any capital growth
and
b) if the tenant has no deposit, if they don't pay the mortgage for a year for example, by the time you repossess and pay fees to do so and sell, you may lose capital.

[jpkeates]

It is a regulated industry but that doesn't stop individuals loaning money in the situation you describe and you can have the same charge over the property that a bank would have.

You can have the same kind of charge, but you can't, for example, repossess if the payments aren't forthcoming, which a "proper" lender can.

[Lawcruncher]

You can have the same kind of charge, but you can't, for example, repossess if the payments aren't forthcoming, which a "proper" lender can.

What makes you think that that is the case?

[ExpertInAField]

I would certainly be interested in knowing the answer for this. I have a friend who recently loaned another friend £250,000 to buy the property they were living in which would be paid back to my friend in monthly instalments. That loan is secured on the property and has wording to that effect.

With the amounts involved, I am sure that my friend would have run it all through a lawyer first. I shall have to ask him.