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How easy is it to put a second charge on a property where the owner agrees ?
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# 1
property.advert
Old 17-07-2011, 3:54 AM
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Default How easy is it to put a second charge on a property where the owner agrees ?

Say someone has a property with a mortgage and I want to lend them a large sum of money and take a second charge on their property as security. Just how easy is that ?

Moving on, can this second charge be variable, based on criteria fixed when the charge was placed on the property ? An example could be a variable interest rate on the debt and thus the charge.

Alternatively, can you put a charge for 1,000,000 on a 100,000 property to cover any eventuality ?

All with owners consent of course.
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# 2
paddedjohn
Old 17-07-2011, 6:45 AM
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how would you expect to recover 1,000,000 when the 100,000 property sells?
Be Alert..........Britain needs lerts.
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# 3
holly hobby
Old 17-07-2011, 8:09 AM
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It is not as simple as having your solicitor register a 2nd charge, as the mge lender with 1st charge has to agree any subsequent charges applied to the property - which they may reject. Additionally there must be sufficient equity in the property to satisfy both 1st and any subsequent charges - usually qualified by survey and valuation.

First point of call is to establish whether the current lender will accept 2nd charges.

Hope this helps

Holly
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# 4
property.advert
Old 17-07-2011, 1:09 PM
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Quote:
Originally Posted by paddedjohn View Post
how would you expect to recover 1,000,000 when the 100,000 property sells?
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 ?
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# 5
property.advert
Old 17-07-2011, 1:13 PM
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Quote:
Originally Posted by holly hobby View Post
It is not as simple as having your solicitor register a 2nd charge, as the mge lender with 1st charge has to agree any subsequent charges applied to the property - which they may reject. Additionally there must be sufficient equity in the property to satisfy both 1st and any subsequent charges - usually qualified by survey and valuation.

First point of call is to establish whether the current lender will accept 2nd charges.

Hope this helps

Holly
Why does a first charge holder have to agree a second charge ? I fail to see what it has to do with them.

I know there was mention of a first charge holder not being able to get good title to the property if a subsequent charge was not covered in full, but cannot this be overcome with some simple legalese, effectively limiting the 2nd charge to the available equity after the 1st charge holder has been discharged ?
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Thrugelmir
Old 17-07-2011, 2:02 PM
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Originally Posted by property.advert View Post
Why does a first charge holder have to agree a second charge ? I fail to see what it has to do with them.
In order for title to the property to be released on sale or disposal. All charges have to be satisfied. If the 2nd charge holder did not receive the funds to discharge their charge. They could effectively refuse and block the disposal.

The 1st charge holder would then need to make application to a court.
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agrinnall
Old 17-07-2011, 2:26 PM
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Quote:
Originally Posted by property.advert View Post
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 ?
This must be one of the most nonsensical things ever said on MSE (which takes some doing!).
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# 8
holly hobby
Old 17-07-2011, 4:08 PM
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Quote:
Originally Posted by property.advert View Post
Why does a first charge holder have to agree a second charge ? I fail to see what it has to do with them.

I know there was mention of a first charge holder not being able to get good title to the property if a subsequent charge was not covered in full, but cannot this be overcome with some simple legalese, effectively limiting the 2nd charge to the available equity after the 1st charge holder has been discharged ?
You have asked the forum for guidance on 2nd charges .. and you have received it.

I am sorry that you aren't happy that the existing mge lender has to provide their authority for 3rd parties to register subsequent charges - but they are the facts, whether they are agreeable to your plans or not.

Holly
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property.advert
Old 17-07-2011, 8:05 PM
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This must be one of the most nonsensical things ever said on MSE (which takes some doing!).
Nonsensical ? that a property can increase in value over time ?

Why that does not make sense it beyond me.
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# 10
property.advert
Old 17-07-2011, 8:44 PM
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Quote:
Originally Posted by holly hobby View Post
You have asked the forum for guidance on 2nd charges .. and you have received it.

I am sorry that you aren't happy that the existing mge lender has to provide their authority for 3rd parties to register subsequent charges - but they are the facts, whether they are agreeable to your plans or not.

Holly
Not quite. I'm not sure one cap fits all as you seem to accept.

A little like thinking Nat West offers the whole cornucopia of banking products and then digging a hole in the sand for your head to ensure you never hear it does not.

I think we need a little out of the box experience / thinking. Sort of pushing the envelope kind of thing.
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# 11
holly hobby
Old 17-07-2011, 9:11 PM
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I have the impression you have no knowledge on how the charging process works.

Further to which what on earth are you talking about .... cornucopa of banking products, hiding your head in sand ... what ??

Your initial question was how easy is it to register a 2nd charge to a mortgaged property.

To which I replied that 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 ...

The best thing to do is to have your friend or whom ever you intend to lend money, to contact their mge lender and find out for certain what their requirements re 2nd charges are - then you will know if they share your way of thinking or not ......

Holly

Last edited by holly hobby; 17-07-2011 at 9:17 PM.
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# 12
paddedjohn
Old 17-07-2011, 10:03 PM
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Quote:
Originally Posted by property.advert View Post
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.
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# 13
agrinnall
Old 19-07-2011, 3:17 PM
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Quote:
Originally Posted by paddedjohn View Post
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.
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# 14
silvercar
Old 19-07-2011, 5:13 PM
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Quote:
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.
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Old 19-07-2011, 7:20 PM
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Quote:
Originally Posted by silvercar View Post
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.
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Old 19-07-2011, 7:25 PM
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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.

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holly hobby
Old 19-07-2011, 7:26 PM
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Post crossed with Thrugs ...

Holly
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jimjames
Old 19-07-2011, 8:07 PM
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Originally Posted by property.advert View Post
Why does a first charge holder have to agree a second charge ? I fail to see what it has to do with them.
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.

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.
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# 19
holly hobby
Old 19-07-2011, 8:23 PM
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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

Holly

Last edited by holly hobby; 19-07-2011 at 11:02 PM. Reason: typo
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Old 19-07-2011, 8:44 PM
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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.
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