Can I be a mortgage lender ?

emjay99

I want to sell my small out-of-town flat. I know a couple who want to buy it at quite a reasonable price. They are offering to pay £700 per month. I have the relevant tables to calculate the repayment period at this rate for the value we have agreed.
Can I just go ahead and set up the necessary arrangements, with them and the land registry, or is there any one else I should inform ?

yelf

Are you being serious? why dont they get a mortgage and pay you the lump sum?

Jacks_xxx

I don't know, but I am very interested in the answer so here have a bump back up to the top.

googler

emjay99 wrote: »

Can I just go ahead and set up the necessary arrangements, with them and the land registry, or is there any one else I should inform ?

The Financial Services Authority?

Would you retain first charge on the property, in the same way that a 'real' lender would do?

What would you do if (when) the 'owners' defaulted on their payments? What legal redress would you have?

Why on earth would any buyer agree to this arrangement with you, when you have no previous experience or reputation in this field, and seem blissfully unaware of regulatory requirements?

emjay99

I like them and want to do them a favour. They are unlikely to be able to get a mortgage as they have just had to bail out someone else and now have no deposit.
I believe that the FSA covers persons doing this sort of thing in the line of business. This would be a very one-off action, and I would have a legal charge on the property.

terryw

Private mortgages are relatively common. I have been a dedicated DIY conveyancer for most of life, but I would definitely use a solicitor here.

googler

This Q&A

http://news.bbc.co.uk/1/hi/3958161.stm

suggests that the FSA regulates the 'sale' of mortgages to consumers. I'd suggest that, even though this is a one-off, you'll be selling a mortgage to a consumer, with all that implies.

Seriously, what will you do if they default?

emjay99

Googler: Yes, but that is the BBC ! FSA rules are for firms, or individuals in relevant businesses. Selling a mortgage is those actions needed to induce a person to take up a mortgage you provide. I was approached to do this, I did not raise the matter. I would have a normal registered charge on the property and if they defaulted I would repossess in the normal way, but with a great deal of sadness. I would do my utmost to avoid that occurring by being really harsh in analysing their financial viability and really flexible if disaster were to strike them.

Gorgeous_George

It is absolutely possible.

If they default, you seek repossession through the Courts. TBH, it is no more risky than BTL other than if they walk away should the value fall, you will spend a lot of money chasing them for any shortfall.

If they want to rent, I'd let them rent.

The key would be the interest rate. I'd want 6% and have it linked to base rates. £20 fee per missed payment to cover your stress. It really can't be worth the hassle unless you are seriously rich and can cope with default.

You'd have to pay tax on the interest - even if they default.

GG

googler

emjay99 wrote: »

Googler: Yes, but that is the BBC ! FSA rules are for firms, or individuals in relevant businesses. Selling a mortgage is those actions needed to induce a person to take up a mortgage you provide. I was approached to do this, I did not raise the matter.

Yes, I know I was quoting from the BBC. Are you saying it's untrue BECAUSE it's stated on the BBC website?

Are you SURE the FSA rules don't apply to you?

Can any of the banks excuse themselves from the FSA rules because the customer approached them, and they didn't 'sell' the mortgage to the customer?

GMS

Check if you need a Consumer Credit Licence to lend money.