Separation and Second Charge(?) on a New Property

AnnKittenplan

To holly and Dave

Many Thanks. I think I'm beginning to understand. The explanation based on the date of registration is probably doing most to clear up my confusion.

If I'm understanding correctly then if the Charges are registered on the same day, as they would be in the case of a new mortgage, then the First Charge and Second Charge are not in the same distinct hierarchy as they would be if the Second Charge was registered on an existing mortgage. It is this which is prohibitive to potential mortgage lenders.

And there's me thinking First and Second meant first and second.

I shall approach my conveyancing solicitor with what I've learned and try to come up with a solution, possibly involving a Deed of Postponement or Deed of Trust (though there may be something in the pipeline coming the other way).

It would be hard to overstate how confused I was, the mists are beginning to clear.

Thanks again.

The_J

I actually think Halifax can do this. I've done it for a remortgage where the wife was staying in the property and the second charge only kicked in once the kids were older. It was a family friend so I pulled some strings but I got the impression it would have been OK anyway.

Dave_Ham

The_J wrote: »

I actually think Halifax can do this. I've done it for a remortgage where the wife was staying in the property and the second charge only kicked in once the kids were older. It was a family friend so I pulled some strings but I got the impression it would have been OK anyway.

If this is the case, you learn something every day. Halifax are flexible, but would have thought it would be thrown out at solicitors..

Gives you a solution if it does, although OH may not be feeling the rates.


Cheers J

holly_hobby

2nd charges to existing mges are pretty simple - and tend not to cause too much issue (if of course the lender permits the registration and there is sufficient equity to cover the charge).

My only concern I thought about this am, was charges are ordinarilly in respect of a defined monetary amount, typically that equal to a debt, so the fact you desire the charge defined as a % of the property value may cause issues re gaining the lenders permission - my main concern in having a % stake is that I believe this will expose you to the possibility of a loss on disposal. For example if from the original pch price, the property falls in value due to market conditions, or sells for a lesser amount than the orig pch price due to a possession order or your ex's own actions, your 12.5% share of the end selling fig, will be worth less that it was when you entered into the agreement. So another potential issue there to consider if your conveyencer hasn't already considered this aspect and how they may protect your capital sum.

Moving on, I think in this case, where the conveyencer is getting confused, is that they are looking at the application of a registration charge in isolation ( and maybe forgetting to consider how it will impact on any additional mge requirements).

However, if he is aware and has considered the ex's mge requirements and the purpose of hte charge, I would expect them to both understand and be able to explain to the layman, the format and how succession of registration charges work - but as I say perhaps he hasn't fully understood what you and your ex want to achieve.

Trusts are a possible solution (as DH has suggested) as is a private loan arrangement (drawn up by your solicitor - but providing no gtes of repayment unless you pursue through the courts) - if having spoken to the lender and presented your proposals, they confirm that they would not be willing to accept a 2nd charge/registration, for whatever purpose throughout the entire term of the mge.

To secure a 12.5% share via the actual deeds, this would be effected under a tenants in common arrangement. However, this would mena that you would also have to be party to the mge, which may raise further lender issues regarding it not being your main residence, and your ex not being a dependant relative.

Additionally, you would (with your ex), be jointly and severally liable for the repayment of the whole mge debt (even if not your residence and effected on a tenants in common basis), which would affect both your credit status and responsibility to maintain mge payments if your ex allows the mge to go into default, your own mge borrowing capacity will also be affected due to your exposure within such an arrangement - so this may not be suitable to your requirements, but something to consider as a last option maybe.

Lots to mull over - I would have a good ponder on whether this would actually be a sound idea, to provide the capital injectino you are considering - especially as you have made it clear that its not a gift and you expect its repayment as an investment (via a % share of property value). But of course thats for you to consider and to discuss with your ex.

Hope this helps

H x

deedee71

I have a second charge on my house which was arranged so I could buy a property and will pay my ex in 2020.

It was with Intelligent Finance and taken out in 2008. They were happy as the LTV still had plenty of room to spare IFYSWIM. ie the second charge is for 33% and I only needed a 50% LTV

Sadly IF no longer do mortgages but just wanted to know they aren't unheard of.

holly_hobby

Exactly - 2nd charges aren't necessarily an issue to an existing mge (subject to equity), albeit their registration is at the complete discrection of the 1st chargee (ie - the mge lender).

The added complication we have here is that the OP wants the charge effected pre-purchase, which means that the lender won't get free title - or at the latest a simultanious registration.

The issue re simultanious registration, is that the ex will have to obtain the lenders consent as part of the application process, and the solicitor will have to ensure that LR register the charge as 2nd registration, if the new lender actually agrees to the registration.

If the OP & ex elect to request 2nd charge post completion, OP has already provided the capital to the ex, yet the 2nd charge application may be rejected by the lender - leaving her a tad exposed if no other arrangements are made - so its a risky stratergy to go into, without sounding out the lenders thoughts before hand.

Hope this helps

Holly

AnnKittenplan

Thanks All.

I really have been banging my head against a wall, sometimes literally, trying to sort this out and coming here feels like real progress. You've no idea of the relief.

It has just occurred me:

1. I proposed the £12½k to £37½k split (thinking this was helpful).
   
2. I wanted some security for the 25% invested in the new property, so I went for the Charge.
   
3. It then became apparent my ex had already agreed a mortgage, without my knowledge.
   
4. When we attempted to add the Charge the offer was withdrawn.

(Can you see where I'm going with this?)

How about my ex gets a mortgage - he already had one - then, after purchase, I pitch in with my £12½k. Is that possible? Is there a mechanism whereby I can do that and have some security. (It sounds like this is where a Second Charge may be viable.)

The rationale: What I am attempting to do is to invest the £12½k wisely, essentially for the children. As I see it the best place for it (I may be wrong) is in the property they are living in. There are other reasons to invest in the house, such as lower repayments (providing there are no penalties) and good will.

It really feels like we might be getting somewhere. I've just phoned the conveyancing solicitor and left a message with the proposal outlined above.

Thanks again.

Dave_Ham

This is what I was saying earlier about the deed of trust being away from the mortgage and then applied as a charge post mortgage.

Whilst there is no guarantee's the mortgage provider will accept this, it is likely based upon experience.

Good luck - I think you have nailed a plan so long as you know that the deed is not techincally 100% guaranteed, but should be enough protection given the circumstances..

All the best...

holly_hobby

Agree with DH - thats a much better plan.

Registration of the 2nd charge post completion, as we suggested, will simplify the matter somewhat, although you should bear in mind that you may have to hatch another plan IF the lender refuses the application, and also that a registered charge does not provide a cast iron gte of the return of capital (as discussed in post #15) - but given the relationship I am assuming that this won't bring any real future issue.

Having said that, given the apparent low LTV I can't see any reason why the lender would refuse the 2nd charge - but stranger things have been known, just have a plan B in place to save any panic !

That just leaves me to say that I am sorry for the circumstances that have prompted your post, but do hope we have been of some help, its now between you & ex, your conveyencer and the lender to put your wishes in place.

Good luck and I of course wish you all well.

H x

Thrugelmir

AnnKittenplan wrote: »

The events (sometimes known as "Triggers") which release my investment to me are:

1. youngest child reaching 18
2. him co-habiting for a defined period
3. selling the new house
4. further order of the court

Who are the children going to live with?