A mortgage lender has introduced a product which effectively encourages a landlord to sell to a sitting tenant at a discounted price.
The so-called Concessionary Mortgage, offered by TSB, works like this, according to the lender.
“If you are a landlord and sell your property to your tenant with a 10% discount or more, the tenant doesn’t need a single penny towards their deposit.
“Using our concessionary purchase option can help tenants and often the First Time Buyers who are hardest hit due to paying higher rent costs and having little opportunity to build their deposit to buy their first home.
“The landlord can take the capital growth and use it to re-gear other properties they own or invest elsewhere, and TSB can help by facilitating the transaction and supporting those tenants onto the housing ladder.”
TSB says the landlord need not necessarily lose out, because by using this deal the sale would not involve an estate agent - so those fees would be saved by the landlord.
TSB mortgage distribution director Roland McCormack says: “This can be a great option for the buyer as they get a discount, but also because they know the area and the property well already. For the seller, it makes the process easier and smoother. They don’t have to have a tenant move out of the property, do it all up, and then wait several months – all while not receiving rent. The seller and the buyer also avoid paying fees that would normally be involved with a house sale – such as estate agent fees.”
A study by The Guardian newspaper say that in addition to TSB, variations of this mortgage product are now offered by Halifax, Nationwide, Barclays and NatWest.
The Guardian writes: “Terms can vary. For example, TSB and Nationwide are among those that explicitly state they do not require the tenant to put down any deposit. However, both Barclays and NatWest say buyers need to contribute their own deposit on top – a minimum of 5%. Typically, this is going to be an arrangement between a private landlord and tenant, though TSB and Halifax say the landlord can also be a local authority, indicating this could be an option for a council tenant where the right to buy is not available.”
Concessionary sales, where properties change hands at below market value, are not new but until now they have effectively been restricted to family members only.
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Great idea why don’t TSB & Nationwide give them £50k of their money, everyone so full of Bull-sugar about the landlord to fund everyone.
Correct Michael.
Why don’t the government step in and offer landlords a tax break to make it more viable. That cost no one any money
Richard - Unfortunately the government are ideologically against giving a landlord any tax breaks. The Greens are already harping on about rent control. They will probably make it so awful for the landlord he will be desperate to sell. Unfortunately CGT will go up. TSB must be an cloud cuckoo land if they think landlords will reinvest!
Another mortgage lender desperate for cash? First time buyers not buying due to interest rates so now trying to woo back landlords who they snubbed months ago?
Luckily, I dont have a mortgage on my portfolio. I paid off my last one at 35 years old and will never get another 1.
For me it's just paying more money to the government and their pals in the banks for the rest of your life.
So who decided the valuation if no agent is involved?
The tenant 🤔😂
😂😂 They’re mad 🤡. Given the shortage of properties in my area, I don’t have to even consider any discounts 👎🏻💰👎🏻💰
William Williams, you hit the main on the head, we can do like the Big Developers done with help 2 buy add it on to the price, there you go you can have 10% off of that. Although slight problem when a Surveyor gets involved as lender will require they always under Value the Property from my experience, it only works for Big Boys. Anyway I’m sure the landlord will be delighted to share his investment that he worked 24/7 to create with someone that can’t be bothered to save a Deposit,
Can't be bothered or can't afford to save up cos they too have been working 24/7 to pay you the rent.
Most tenants rent because they can't afford to or are not ready to buy. Most don't want or can't afford to buy the property they rent. If your property is managed the agent WILL charge their selling fee. Whose value? The lender? 10% below THEIR valuation? No thanks!
Mortgage valuers will only value a property at what it is worth, in comparison to other similar properties, or what it is selling for, so TSB will have to be lending at 100% otherwise the tenants/buyers will not be able to borrow the money. !00% lending will be dearer. In terms of the landlord re-investing the profit in other properties this will be after paying all of the CGT on the profit. Profits on residential properties cannot be brought forward into other purchases.
Having said that, it is something I would consider if the valuation hurdle could be overcome. It saves on the loss of rent incurred when selling a vacant property, amongst other things.
I agree in part but you can’t sell a property to invest in another property, you can’t roll over the capital gain so you lose 24% of any gain, so not economically possible careful where you buy you are stuck there for life, I am a victim.
Don't forget SDLT incl the extra 3%!
I too would have considered this on my cheaper properties, the figures could work. But once you get above 200k then the Landlord is giving away too much.
I'll try it next time i want to buy a car, lol
When l sell, l want top dollar as will be etting out. Not reinvesting after CGT has ropped my eyes out.
The pros: rent right up to completion. That could be 6 x months as things stand.
On one of my cheapy properties that's about 300 a month profit, so 1800 earned.
The cons: Even on my cheapest property, the losses of holding it empty for 6 months during a sale at market rate are far less than the approx 5K costs. So even if I was really, really nice - and offered a 5% discount, that would be meeting them half way, as they need 5% deposit to buy - I'd still be losing a number of thousands.
In short, Mr Bank / lender - NO. Just no. Shameful. Was it a Labour leader idea?
When I remortgaged a few years ago one property I have was valued £20k below what I paid for it.
I said to the guy how can it be less than what I paid twenty years ago. No sales along here so averages are low. Basically algorithm fkd due being quality house in a quality area that no one wants to leave.
Estate agents quoted me double what I paid to sell. Banks and building societies are having themselves on…
Surely this all depends on the valuation. If you are happy to sell at 10% less than the valuation, then all well and good. Given that a valuation and actual market value may not be the same. If the valuation is too low then it doesn't work. Estate agent fees at 1% plus VAT on a £200K property, that's only £2400, so not really a huge saving.
"TSB says the landlord need not necessarily lose out"
So, saving a 1.5% agent fee will offset a 10% discount. BS!
No thanks.. TSB can give the tenant the deposit. But TSB needn't lose out as they give the tenant the mortgage and make it back with interest and fees. There you go Roland. One dumb a$$ idea deserves another.
As others have already stated, it is best to use an agent for valuation and sales. In the scenario stated, Tsb must think that landlords are dumb to so prominently wish to gain business from 1st time buyers, but not contribute anything. This is at landlords' expense. How about they paying the landlord 10% to help the tenants to become a home owner, as they can both gain; one with own home, the other gaining interest payments for possibly the full term. Landlords would have helped them both by selling it to the tenant to become a home owner, not necessarily in the landlord interest. It is not in landlords interest to sell a property to tenant and buy another one. After paying cgt and stamp duty, not the same amount of money left to buy equivalent value of property. So even in this scenario, the landlord is helping and supporting both the tenant and the Tsb, without any reduction.
Yes that seems to sum it up. Surely they are getting more from a BTL mortgage on a higher rate than a residential mortgage, so BTL is more profitable for them?
I think the c/gains tax rate should be half say 12% for someone who wants to sell one and buy one in the same year for any amount of reasons whether to buy bigger or smaller or another area or buy one to refurbish, it would give some movement to the market SD, Solicitors, surveyors, kitchens, bathrooms and 20% VAT etc
HouseMartin I’ll give you that one but it’s not down to the landlord.
Mr Michael Gove your fake friend with the RENTERS REFORM BILL and removal of fixed term Contracts driving out landlords, the local Authorities with their massive expensive licensing Schemes and thousands on compliance per property + all the extra terms & conditions and certification at great extra costs, the Revenue tax hike and Section 24. So it’s not the landlord that’s that made it unaffordable for Tenants at all.
These lenders are a joke on the one hand they put down the PRS ie the Nationwide Foundation regularly condemns the PRS and TSB have been similarly critical then they try to sell LL’s a con man’s trick.
Their loan book won’t be rebuilt by mauling the PRS and simultaneously trying ‘socially engineer’ loans to many of the most financially vulnerable.
If TSB and other likeminded lenders are so in favour of assisting first time buyers - perhaps they can offer them “interest free loans”, that would be really helpful to them!
If it was Capital Gains Tax free .
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