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Buying a property with a secured loan attached to it
Doczoc
Posts: 13 Forumite
I wonder if someone could help me work through a few queries.
I recently visited my brother, who lives 200 miles away in South Wales. He has lost his job and is in the process of having his house repossessed. He has little emotional attachment to the house, as he was living there with his ex wife that ended in a particularly acrimonious divorce, and has resigned himself to declaring himself bankrupt. My brother has always been a 'ducker and diver' as it were, so he seems pretty buoyant about the whole thing. I don't think we're cut from the same cloth because if it was me I'd be mortified!
Anyway, the house has been valued at £60K and he has a mortgage of £22k and a secured loan of £35k attached to the house. He has tried to negotiate a settlement figure with the bank and loan company but they want to be paid in full. He has already tried to sell it via auction but it only reached £41k, so didn't sell. Recently the house next door went for £45k, so I guess the estate agent valuation is above what could be realistically achieved.
Despite all this I am quite interested in buying it, as long as the price is right, as if I can get the property for around £40k I can make a 9% return in rental. The idea being to use it as a pension pot for my wife rather than attempt any short gain profit.
What I'm strggling with is the idea that the loan company has a claim to the house when my brother doesn't even own it? If I bought it off my brother for £40k and he paid the mortgage company off. Could the loan company come after me for the remainder of the money they are owed. Is it my brother who is liable for the loan or is it transfered with the ownership of the property?
Thanks
I recently visited my brother, who lives 200 miles away in South Wales. He has lost his job and is in the process of having his house repossessed. He has little emotional attachment to the house, as he was living there with his ex wife that ended in a particularly acrimonious divorce, and has resigned himself to declaring himself bankrupt. My brother has always been a 'ducker and diver' as it were, so he seems pretty buoyant about the whole thing. I don't think we're cut from the same cloth because if it was me I'd be mortified!
Anyway, the house has been valued at £60K and he has a mortgage of £22k and a secured loan of £35k attached to the house. He has tried to negotiate a settlement figure with the bank and loan company but they want to be paid in full. He has already tried to sell it via auction but it only reached £41k, so didn't sell. Recently the house next door went for £45k, so I guess the estate agent valuation is above what could be realistically achieved.
Despite all this I am quite interested in buying it, as long as the price is right, as if I can get the property for around £40k I can make a 9% return in rental. The idea being to use it as a pension pot for my wife rather than attempt any short gain profit.
What I'm strggling with is the idea that the loan company has a claim to the house when my brother doesn't even own it? If I bought it off my brother for £40k and he paid the mortgage company off. Could the loan company come after me for the remainder of the money they are owed. Is it my brother who is liable for the loan or is it transfered with the ownership of the property?
Thanks
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Comments
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oops having an off day - post deleted as was pure gibberish0
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If you buy it then who will live in it?
The same ducker and diver who wants to wriggle out of his secured debt?0 -
poppysarah wrote: »If you buy it then who will live in it?
The same ducker and diver who wants to wriggle out of his secured debt?
No, he has moved in with his new woman. I'll rent it out via an agency. I am a totally 'by the book' kind of person, not only would I not do anything remotely dodgey, I'm a teacher and apart from anything else any charge of fraud etc would end my career, but I certainly wouldn't mix business with my family, not worth the hassle. Hope that has answered your insinuation.
In fairness, he has lost his job hadn't missed a payment till then. In your opinion is everyone who has filed for bankruptcy on here just wriggling out of their debt?0 -
the debt is owed by your brother and is in his name, it is secured against the only asset he owns which is valuable enought to cover the debt, ie the house
when brother sells the asset the charge becomes immediately due for settlement, however if the sale produces insufficent money to pay off the debt then your brother remains liable for the debt in his name
if your brother then goes bankrupt becuase he cannot pay off his debts which are now due then thefinal settlement of the debt is a matter for the bankruptcy process
the short answer, no the debt does not transfer with the house
Thanks, I've read elswhere on the web this morning that the lenders have to give permision to sell. Since they've already insisted on full settlement I doubt they would accept an offer from me. I guess I'll have to wait till it comes up in auction. See what happens then.0 -
This might be a really naive view, but could his brother not sell him the house for say £1, then once the sale has gone through declare himself bankrupt? Then give his brother the money behind closed doors.0
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the debt is owed by your brother and is in his name, it is secured against the only asset he owns which is valuable enought to cover the debt, ie the house
when brother sells the asset the charge becomes immediately due for settlement, however if the sale produces insufficent money to pay off the debt then your brother remains liable for the debt in his name
if your brother then goes bankrupt becuase he cannot pay off his debts which are now due then thefinal settlement of the debt is a matter for the bankruptcy process
the short answer, no the debt does not transfer with the house
Sorry - this is very dangerous advice. The debt is owed by your brother but IT IS SECURED AGAINST THE HOUSE. The charge remains and if payments are not kept up the lender can call in the charge - irrespective of who then owns the house.
Why do you think solicitors always insist that all mortgages and other charges are paid off before they allow their clients to buy a property?
If you go ahead and buy the property, make sure both the mortgage and the secured loan are paid off.the short answer, yes the debt does transfer with the house0 -
This might be a really naive view, but could his brother not sell him the house for say £1, then once the sale has gone through declare himself bankrupt? Then give his brother the money behind closed doors.
I think that is why the lenders have to give permission to sell I seem to have two options somehow getting the lenders to enter a three way agreement? Or wait for it to come up in auction.0 -
Sorry - this is very dangerous advice. The debt is owed by your brother but IT IS SECURED AGAINST THE HOUSE. The charge remains and if payments are not kept up the lender can call in the charge - irrespective of who then owns the house.
Why do you think solicitors always insist that all mortgages and other charges are paid off before they allow their clients to buy a property?
If you go ahead and buy the property, make sure both the mortgage and the secured loan are paid off.
That is what I thought initially, if the house is sold as a repossession, will the charges be settled, even if it it goes for less than the outstanding balance?0 -
The lender will generally block the sale if the capital cannot be paid off.0
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The house cannot be sold without the permission of both the mortgage holders and the loan company that holds a second charge on it.
They are not going to allow any dealings that might result in them losing their investment.
In the event of the brother declaring himself bankrupt, the house will be sold to the highest bidder, the mortgage company (holding the first charge on the property) will get all their money back and the loan company (second charge) will get the remainder, upto the value of their commitment.
If there is any surplus, it will be returned to whoever is administering the bankruptcy for distribution to any other creditors.0
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