Putting second charge on my own property ?

Max_1066

I would be grateful for any advice regarding the following:-

My brother very kindly loaned me a total of £20k so I could complete a one-off IVA earlier this year. I have a property which I rent out and estimate the equity is approx £40k. The agreement with my brother is that the loan is secured against the equity in the rental property. Obviously this is a gentleman's agreement however I would like to ensure he's protected should anything happen to me. He's not bothered however I'd like to cover all the bases this time.

I've been thinking about a second charge in favour of my brother however I believe the mortgage company would have to agree to this - and so suspect they would object ?

My underlying concern is that if I were to go bankrupt (and it was a bit close previously) I want to ensure he gets the £20k back.

Is this the best approach or is there another way of doing this. Can we just sign an agreement and then have it witnessed ?

Any advice would be most welcome.

Thanks

Sparklyfairy

I would call the Land Registry and ask for advice about this as they'd be the ones who actually add the charges...hth.

Max_1066

Good idea, I've spoken with the Land Registry who were VERY helpful and are sending me the appropriate forms.

I don't need to involve a solicitor although there are a few forms to fill in to put the charge in place. Total cost = £50 !!

For anyone else reading this the mortgage holder (first charge) will need to agree to this.

jonesMUFCforever

I'm not sure that first mortgage lender would have to agree as they will be first in line and their security would not be affected.
They would only have to agree if someone wanted to jump the queue as it were.

Max_1066

Apparently it depends if there's a 'restrictive' clause on the first charge (mortgage). The Land Registry can tell you if this applies. If it does then agreement has to be obtained from the mortgage company.

Has anybody tried this ?

Emmzi

In the event of bankruptcy you may have a problem here - you have been lent the money and are now in effect making one, and only oe, of your lenders a preferred creditor by granting them security after the event. The OR may decide that is null/ challenge it, because clearly the money was not lent on the basis of security being available and, were your other creditors to be aware of your position in the way your family is, they may have opted to secure their borrowing also.

I think I would ask for a second opinion on the bankruptcy board, or pay to see an insolvency practioner - I am not totally sure that this will do what you want it to.

Max_1066

Thanks Emmzi, good point however due to the IVA having been completed there are no other creditors now apart from the mortgage company.

Emmzi

Max, glad you are almost home and dry then. :-)

I assume this is very long range forward planning then! I would probably ensure you have the loan fully documented and signed with witnesses, stating it is a secured loan. You'll need some legal advice for this but it is probably worth it - if youare formalising part of your gentleman's agreement, you should do all of it.

chesky369

Yu should also make a will.

pool-hustler

make a Will

Max_1066

..... think I'll make a will !!

Thanks for the advice everyone, REALLY appreciated.