Individual(s) Issuing A Mortgage ?

spyrogyra

OK. I know it's a long shot but I am tempted to ask the knowledgeable. Imagine 3 individuals pool £200k of savings and buy a house. They don't want to rent it but to mortgage it. I know a mortgage is a regulated activity, but can they do it through a FSA authorized company acting as their agent or intermediate? If the answer is is still "no", would it be possible to sign a tenancy agreement with a perspective buyer with a clause stating that if the tenants rent the property for, let's say 25 years, they would become the legal owners. I've heard that it is possible for an individual to issue a mortgage to another individual in USA, but that doesn't help much. I would appreciate comments from professionals .

Dave_Ham

You can have a legal document stating whatever you want to happen, although if any way this appears to be a mortgage or any documents to this effect then you as 3 individuals do not have (I assume) the appropriate consumer credit license to carry out these activities..

Lease to own, rent to own etc. schemes are becoming outlawed, if you are doing this to give a family member a headstart etc. then you can probably all protect each other legally with the help of a solicitor.

All the best

spyrogyra

Thanks. Then the core question is : "...but can they do it through a FSA authorized company acting as their agent or intermediate?"

Dave_Ham

Unlikely they would take on...

Never know though

getmore4less

What are you trying to do. back to basics before the you buying a house.

as a single one off transaction I think you can each lend the person the money and put a charge on the property they buy.


the biggest problem with lending money is making sure they pay back the debt, sticking a property in the middle complicates it.

kingstreet

Why do the three buy the house?

As gm4l said, why can't they simply lend the purchaser the money and secure it on the property he/she buys?

spyrogyra

Consider the 3 individuals as investors, not happy with current interest rates, not happy with volatile markets,annuities,etc. They wish to lend the money SECURELY. What better security that a house ? The question is how this could be done the simplest way.

grey_gym_sock

if you want to lend money at a relatively good interest rate, without taking too much risk, and are happy to tie your money up for many years ...

1 alternative is buying individual corporate bonds (either at issue or on the market) and holding them to maturity. picking a point on the risk/reward spectrum that suits you.

is mortgage lending better than that? i.e. less risk for no less reward, or more reward for no more risk?

spyrogyra

Of course people are aware of the corporate bonds alternative. Still many classify them as risky, others think of them as another kind of shares/bonds. Many buy-to let investors would prefer a business model as the one I'm suggesting providing they can easily opt for such a model. Some would deem a small "management" percentage reasonable for peace of mind.

grey_gym_sock

yes, well, some corporate bonds are very risky. but you can decide which are safe enough for you, and then see if the return is high enough. the reason i mentioned buying individual bonds and holding them to maturity is that then you are not dependent on the market price in order to get your money back, unlike e.g. shares.

if BTL investors want a low-risk model, then i think they're in the wrong business. as perhaps many of them are.

of course, another alternative to residential BTLs is commercial real estate, which can be properties with long leases with financially strong tenants.

Thrugelmir

spyrogyra wrote: »

Consider the 3 individuals as investors, not happy with current interest rates, not happy with volatile markets,annuities,etc. They wish to lend the money SECURELY. What better security that a house ? The question is how this could be done the simplest way.

In simple terms. A mortgage is a secured loan .

The mortgage is actually the legal term for the charge put on the property to secure the debt.

The loan element is no different to any other loan.

So there is no reason why you cannot conduct the transaction through the correct channels. Most importantly that the borrower receives independent legal advice.