Paying developer part of the purchase price in "rent"

snapslam

My partner I have recently purchased our first house and being first time buyers we had a low enough budget. We did try to haggle down the price as one normally does and while searching for the property one developer has mentioned that if the bank will not give us what he is looking for the house there is away around it. He suggested that we would pay the remaining balance to him just like you would pay rent monthly. it is impossible to pay mortgage and rent at the time so we did not entertain this idea but it still has me wondering how is that legally possible? If anyone has any knowledge in that area please explain? Thanks

Bepolite

It's simple really.

House costs €200,000. You have a mortgage and deposit of €150,000. The developer is so desperate to sell (but not deserate enough to come down to €150,000) he tells the bank the house is actually €150,000 so they lend on that basis and you pay the developer €50,000 under the table.

There was a similar set up on site I was looking to buy. The guy wanted €75K for the bank and €10K+ in cash for himself.

I can't imagine it's legal.

snapslam

And the developer would just trust me to pay that every month? What happens if you don't pay sure he cant take the house back it would belong to the bank in the first place..

Bepolite

snapslam wrote: »

And the developer would just trust me to pay that every month? What happens if you don't pay sure he cant take the house back it would belong to the bank in the first place..

I suspect various methods would be employed of dubious legality. I could be wrong of course and there could be a completely legal way of doing this through a developer. It's the same way the affordable housing scheme used to work and there used to be rent-to-buy schemes.

It could also be a case that the back garden is sold as a separate entity... all sorts of scenarios spring to mind.

If it was a legit scheme - he wouldn't be able to take the house back but he would be able to get a judgment mortgage over the property, that you'd eventually have to pay.

schemingbohemia

Certainly Revenue would be very interested in this sort of mechanism.

hullaballoo

Bepolite wrote: »

I suspect various methods would be employed of dubious legality. I could be wrong of course and there could be a completely legal way of doing this through a developer. It's the same way the affordable housing scheme used to work and there used to be rent-to-buy schemes.

It could also be a case that the back garden is sold as a separate entity... all sorts of scenarios spring to mind.

If it was a legit scheme - he wouldn't be able to take the house back but he would be able to get a judgment mortgage over the property, that you'd eventually have to pay.

Thumbs up.

snapslam

definitely glad we did not consider that option we were lucky enough to get a small loan from our parents and even with that they had to sign away their rights to the property so that's why I wondered how would the developer have any right to the money after purchase.. but I'm sure he would of used various money collecting methods if we wouldn't pay....

Bepolite

Well as I say it smells to me but I don't know the specifics. Your solicitor should be able to advise you.

Even if it is a legit scheme you would probably be limiting your mortgage options and as a result not getting the best rate. This 'loan' from your parents may have to be declared to the bank. I'm sure you mean gift with a letter to back up same.

snapslam

yes they did have to write a letter stating it was a gift and sign numerous amount of documents with the solicitors.
its a little late asking the solicitor now but if I ever need to go back I certainly will ask
thanks for reply definitely got me thinking of all the things involved.. its a great idea in theory for those not being able to get enough funds but don't think it is worth the hassle as anything can happen..