How easy is it to put a second charge on a property where the owner agrees ?
Comments
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property.advert wrote: »It is a principle, kept simple by using simple numbers.
Stirling Moss lives in a £15,000,000 property he built for £5,000. Does that answer it for you ?
in your op you say that its a £100,000 property, therefore you cant put a charge of £1m on it. In your above example, Stirling Moss's house isnt a £5,000 property its a £15,000,000 property.Be Alert..........Britain needs lerts.0 -
paddedjohn wrote: »in your op you say that its a £100,000 property, therefore you cant put a charge of £1m on it. In your above example, Stirling Moss's house isnt a £5,000 property its a £15,000,000 property.
Exactly, thanks for explaining it while I was away from the board. If property.advert can't understand it then maybe he or she should steer clear of complex financial transactions.0 -
a 2nd charge to a mortgaged property requires the mge lenders consent - and I don't think there is any amount of "out of the box thinking or experience" that will alter that fact ...
Lenders often go to court to secure unsecured debts on a property. I'm thinking of unpaid water bills and credit card bills in arrears. These debts then become secured on the property, either with the agreement of the borrower or by court application. The mortgage (1st charge holder) is not consulted.I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, mortgages and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
Lenders often go to court to secure unsecured debts on a property. I'm thinking of unpaid water bills and credit card bills in arrears. These debts then become secured on the property, either with the agreement of the borrower or by court application. The mortgage (1st charge holder) is not consulted.
This is a charging order. Normally to obtain a court's approval your creditor would have already defaulted under the terms of a CCJ for example. As you would need to convince a judge that you had exhausted normal avenues. That's not factoring in the additional cost either.0 -
A creditor can only have a debt secured on a property i.e a charging order - if the debtor defaults on a CCJ - even then the creditor has to go back to court to apply for a charging order, that the court may not allow.
The individual is not applying for a 2nd charge by order of the court - so lets compare apples with apples and keep the thread uncomplicated and relevant.
Holly0 -
Post crossed with Thrugs ...
Holly0 -
If I have a first charge of £100,000 on a property worth £150,000 then according to your thinking someone else could then put a second charge of £50,000 against it, making up the total property value.property.advert wrote: »Why does a first charge holder have to agree a second charge ? I fail to see what it has to do with them.
What happens if the property drops in value to £120,000? Does the first charge get all their money and the second charge only get £20k of their £50k back? Or would you expect them both to take equal drops? If so then as first charge holder I'd be pretty peeved that someone added a second charge I knew nothing about.
Logically it would make no sense at all to have charges popping up all over without approval of the first holder.Remember the saying: if it looks too good to be true it almost certainly is.0 -
Charging orders are ordinarilly placed in order of date placement (unless there is a deferred or open charge in place).
First charge holder has first dibs on any monies from the property, second charge access to what is remaining after 1st charge settlement .. so on ... so yes the 2nd charge holder may end up with nothing, or a lesser amount than the amount of their charge, if the 1st charge claim (in the event of neg equity) exhausts all, or most of the equity available in the property. And in that event they can challenge and delay the sale of the property - which Mr 1st charge obv won't be happy with - hence their agreement in the first place is reqd.
Which is why in the case of secured loans the creditor will require details of the os mge (aka 1st charge), and a survey to ensure that there is sufficient cover & protection for the repayment of the proposed loan.
Second charge application always requires the permission of the first charge holder - unless the charge is in relation to a court order with a charging order placed upon the property under instruction of the presiding Judge, on application of the creditor.
There are no ifs, or buts on this ...... the permission of the 1st charge holder is necessasry for the application of 2nd and subsequent charges without exception ......(notwithstanding court instigated charges as discussed).
Hope this helps
Holly0 -
What happens if the property drops in value to £120,000? Does the first charge get all their money and the second charge only get £20k of their £50k back? Or would you expect them both to take equal drops? If so then as first charge holder I'd be pretty peeved that someone added a second charge I knew nothing about.
That's the classic example. As the 2nd charge holder doesn't have to agree to releasing their charge.0 -
There are no ifs, or buts on this ...... the permission of the 1st charge holder is necessasry for the application of 2nd and subsequent charges without exception ......(notwithstanding court instigated charges as discussed).
You are correct that in many cases when trying to obtain a second charge, the 'Consent' of the first mortgagee is required. This is due to the first mortgagee registering a Restriction on the title of the property at Land Registry. However it's not quite "without exception" - a number of lenders do not register a Restriction (Cheltenham & Gloucester, some Santander & Halifax mortgage products, Northern Rock to name a few) and in these cases Consent to a second charge is not required.
Restrictions have two main purposes -
a) to stop further borrowing behind certain flexible current account mortgages (Santander and Bank of Scotland usually)
b) the first mortgagee charges the lender, broker or solicitor that applies for Consent a fee for granting Consent. This fee can be anything between £25 (Woolwich) to £150 (Nat West).
Example (b) is the main reason Consent is required - a very nice earner for the mortgage lender. Halifax receive many hundreds of requests every day, charging £100 for a letter with a one line acceptance to a second charge. These costs, as always, are ultimately passed onto the borrower.
It is very rare for consent to be refused. As well as the example (a) above, some sub-prime lenders will refuse consent if the mortgage is in arrears (Kensington, SPML) and The Mortgage Works will not allow the total borrowing to go above 60% of the property value. Other lenders will only provide Conditional Consent, i.e. "we will grant consent if the arrears of £X are paid".0
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