WHY DO A NO-MORTGAGE DEAL
Why would we even want to do a no-mortgage deal? And who would even enter into such an arrangement?
Well, we like no-mortgage deals because, sometimes, getting a mortgage is a challenge. This is not because there are necessarily financial difficulties, you may just be unable to get a mortgage because of the laws and rules of the country or lender. For example, if you are a UK citizen who has lived abroad for some time then a UK lender will find it difficult to lend to you.
So, one of the key reasons for understanding these deals is to ensure that you have options available to you no matter what situation you find yourself in.
Your goal when putting a deal together is find a WIN-WIN scenario. It is critical that you find out what the vendor actually wants. And this can sometimes be tough as the vendor is probably a stranger and may not want to open up to you. Bear in mind that the sale of the property is normally to raise cash and all you need to know is what they want the money for.
Once you’ve established what they need the money for, you can start to put together a deal that suits all parties.
THE LEASE OPTION
So-called because you will be taking a lease AND you will have an option to buy.
Put another way, rent the property and then, buy it later but only if you want to.
This is a great way to use a property as if it were your own and is very flexible for you. As you rent it, you could refurbish it or you could rent it out before you buy it. And as you don’t have to buy it, you can just hand it back at the end of the lease term.
THE INSTALMENT CONTRACT
So-called because you are paying instalments on the property and there is a binding contract.
With the instalment contract, you buy the property over a number of years making instalment payments every month. You are not renting the property, you are buying it. In other words, the vendor has become your lender. Contracts are exchanged but the final stage of “completing” on the property does not happen until you make the final payment.
This is a great strategy if you absolutely must have the property but cannot get a lender to agree to lend you the money.