LEGAL HELP Does this sound right to you?

I am a spanish resident and want to buy a  250K property in spain from an irishman privately.

I cannot get a mortgage from the bank so he has offered to act as a bank as long as i put 50K down and pay 1500euros with 4% interest a month for 5 years and then i must find a loan to pay him the rest at the end of the 5 years.

He will hold on to the deeds until i get him all of the money in 5 years .

i  am confident i can keep up the payments but i am worried that he is holding onto the deeds and that i could lose all my money after 5 years if he doesnt hand over the deeds.

We would obviousley get contracts drawn up for security but could i still get stung in the end????

Any advice appreciated.

Thanks.

 Providing it is dealt with buy a solicitor there should be no problem. I expect he will add a default clause so that if you don't keep up the payments the property will revert to him and you will loose everything you have paid.

One of our clients is doing the exact same thing at the moment and everything is working out well. They are not charging interest though, and the monthly payments will be deducted from the total owed at the end. 

A lot of property owners who do not need all of the money out of their properties are offering this sort of financing now as a way to sell their houses, as bank mortgages are few and far between!!

Hi Guys.

Thanks for the replies.

A contract will be drawn up but i dont think it will be in the presence of a notary and registered because it will not be ours for 5 years ,but i do not know about this.

Could this still be done?

Thanks.

Persoanally I wouldn't touch this deal with a bargepole.  I reckon as soon as you put your 50k down thats the last you will see/hear from this fellow.  Having said that, I don't know how many checks you have carried out to see if he is the rightful owner of the house etc.  For a start I would start asking neighours if they know anything about the man.  If those enquiries are positive in your favour, then you ay want to follow the advice given by the others who have replied thus far.  I would certainly not part with any hard cash otherwise.

CAVEAT EMPTOR

Presumably you mean an annual interest rate of 4% but your message does seem to read that the vendor/lender wants 4% per month

Also the interest is 4%

So do i pay 4% on the 1500 euros a month OR 4% on the total amount over 5 years?????????????

I'm with Jimbofinn on this one.

Sounds like some type of option to buy/rent contract .....

You'll most likely be back on here in a few years time telling us you've paid all this money and still can't get a mortgage and owner is going to sell to someone else etc.

If you really want to go ahead then I would try and do it without the EUR50k deposit/option fee and jsut agree that % of rent you pay gets deducted should you excercise option to buy within 5 years.

That way it's just rent  ......

You'll almost certainly be charged interest on the amount that is being financed i.e., 200k.

How the interest is charged depends on what you agree with the lender and is legally documented. If it is written up like an HP agreement then the 4% would be applied on the 200k for the whole 5 years regardless of the capital portion included in the €1500 per month repayments.

If it's drawn up like a normal mortgage loan then the interest element would reduce each month (or possibly each year) as capital is repaid.

This would not be by public deed and the deposit paid will not be registered against  the property.

It would be a straight forward private contract - more likely Contrato de arrendamiento con opcion de compra

Although it would be unusual to run for 5 years - usually 1-2 years is the norm.

I don't believe the death of the owner would impact becuase the proprty would pass with the tenant and the option contract.

Lucas,

                        as you can see this is causing confusion with conflicting advice being posted.

As its your money at risk, do yourself a favour, speak to a lawyer.

LEGAL HELP Does this sound right to you?

No Lucas and it doesn't sound right to you or you would not have come to EOS for assurance.

Be very,very careful and as others have said get legal advice. Preferably from a lawyer who has absolutely nothing to do with the vendor, i.e., independent.

Better still, walk away.

 Lucas423:

As far as a good private contract is signed between you, I can see no problem with this. Contrct will have to cover all angles of legal status in the meantime, cancellation rights...

Kindest regards,

MAria

Lucas

You are paying quite a sizeable deposit EUR50k

What if circumstances change and you can't keep up with monthly payments or you just don't want the house anymore?

What if at end of 5 years your circumstances have not changed and you still cannot get a bank mortgage?

I would be more inclined to look for a simple 1-2 year rent with option to buy contract but with NO deposit and if you buy in that time period then all rent is deducted - this would be more the norm. CAM are offering this on their reposseed propertes etc

Also have you checked if there is already a mortgage on the property? if so maybe you could subrogate.?

 Lucas, I'm a financial advisor.  Please let it fall. when you put money you have to have deeds, if not then go to north cyprus and with that money you will get a mega-villa, having no deeds for sure for 18months and then ... hopefully yes, but even not.  but do not do that, the life is complicated do not complicate it more than due. If he does you deeds of a different property or other concrete guarantee (I mean hard assets: phisical gold, lands, properties) gradually compensating your payments,  then could be interesting, but not at this proposed conditions.