Can I be a mortgage lender ?

emjay99

Thanks for that GMS, I have checked the OFT "Do you need a credit licence " booklet which states

"If you only ‘occasionally’ enter into a transaction requiring a licence, you will not be treated as carrying on that kind of business and will not need a licence."

silvercar

The zopla website may have advice on similar sorts of transactions.

I would have thought there is nothing wrong in principle but it may be more difficult if they default on repayments. Harder because you would be personally involved and possibly a court may be more sympathetic rather than a standard mortgage possession hearing if it ever got to court.

Consider what you would do if you had a change of circumstance and couldn't release the money.

Definitely use a solicitor.

emjay99

Thanks Silvercar. Zopa have a very relevant blog entry :-

"As you know we have been in discussion with the OFT for some time about who of our lenders are required to hold a CCL to lend at Zopa. The test of needing one has always been whether you are lending in the course of a business and we, not the OFT, set the limit of £25,000 that we’ve operated with to date. "

The money is not so large that we would suffer badly if they failed in circumstances where we would not proceed to reposession.

bryanb

My GF (Now wife) set up exactly this arrangement with my parents when we "Loaned" the cash to buy their council house. The solicitor simply put a charge on the house in her name. In fact she expected no payments on the loan and took possession of her 50 % of the house on the final death. (I financed the other 50%)

Conrad

Make sure they cannot quietly raise further funds against the property. If it were me my 'knee jerk' instict would be so draw up some sort of private agreement that any money they pay me effectively buys a little more of the property each month 'notionaly. There is no way I'd want my name off the needs. You need to take care as they will have certain rights.

elfen

I'd imagine you could set a contract with a solicitor....stating total purchase price, amount payable per month and for how long, interest and any fees due for late payments etc...

mizzbiz

Read 'Rich Dad Poor Dad'. This is exactly how Robert Kowasaki made his money. Most of the time, the buyers defaulted on the mortgage to him and he regained possession of the property AND had all the payments made to that date, but if they kept up the repayments, he had a solid income for 25 years. Not sure if this also applies to the Uk, I doubt it due to FSA rules if they apply, but maybe a similar strategy could be applied??

Do you have a mortgage on the property? If so, you can't do this.

Nixxx

I thought supplying a mortgage was a regulated activity and would require authorisation under the FSA rules? I don't understand why that wouldn't apply in this instance.

Mrs_Z

Hi Emjay,
Regardless whether you can do it - don't do it! First of all, it's never a good idea to mix business and favours! If this couple can not get a mortgage at the moment, then rent it to them until they can and then sell it to them. Getting yourself into a long term contract (25 years?) is fraught with unforeseen circumstances from both sides.

silvercar

Nixxx wrote: »

I thought supplying a mortgage was a regulated activity and would require authorisation under the FSA rules? I don't understand why that wouldn't apply in this instance.

Its only loaning money and putting a charge on the deeds to register the transaction. Relatives do this all the time without FSA registration.