Second charge never agreed by primary lender 8 years ago!

Trent1211

Hi, I took out a small second mortgage on my property in August 2005 via First National, now GE Money. Due to the pretty unattractive interest rates of the second secured loan (young and foolish) and the amount of equity in my property now I approached my primary lender HSBC to seek equity release to pay off the second mortgage and to also to pay to come out of a fixed rate deal that I'm coming to the end of.

In terms of the mathematics of lending up to 80% of the value of the property HSBC were more than happy to lend on that basis but would not entertain it due to the second charge that they had no knowledge of and said that had they been approached by the second lender would not have agreed to. They have also said that they would not allow me to make any changes to my mortgage until the second loan is cleared so the second unofficially secured loan is now acting as a barrier to me getting a better deal.

Long story short where do I stand with the second loan if they never actually charged it against my property eight years ago? I'm considering a personal loan to clear it then renegotiating my mortgage with a home owner loan on top to then in turn clear the personal loan but I'm wondering about the legality of the second charge and whether there is some sort of loophole I could use to get out of it?

Dave_the_Ginger_Cat

First off, I would get an up to date land registry search on your house to be sure of the truth.

http://landregistryservice.co.uk/index.php?page=service&act=list&group=6&gclid=CMTTi5XewrgCFRMgtAodEg8AZQ#service_47

I think it's more likely that the charge is registered and that HSBC have not recorded it than it not being registered at all by GE

Trent1211

Thanks Dave. It comes up on my credit check file as a second mortgage on the property and I'm pretty certain that there is in fact a definitive charge registered but HSBC claim that they should have been approached for permission which would not have been forthcoming. I'm wondering about the ramifications of relaying this to the second lender GE?

GMS

You may well be able to challenge the legality of the charge. However all this is likely to do is to make the loan unsecured. The loan won't be written off.

You took the funds and presumably spent them. Therefore you need to pay them back. Only dispute is whether it is to be a secured or unsecured debt.

Have you looked at moving the first and second charges to a new lender as one loan?

Trent1211

That's my next port of call although HSBC (quite sniffily I might add) said that "nobody would touch me with a second charge in place"

GMS

Trent1211 wrote: »

That's my next port of call although HSBC (quite sniffily I might add) said that "nobody would touch me with a second charge in place"

Nonsense.

Have you kept up payments on both first and second charge loans?

May be worth a chat with a broker to see what is available.

Trent1211

Absolutely. Never missed and I have plenty of equity. I just wanted to fish around this issue to understand the whys and wherefores before I approach another lender/broker. If HSBC want to lose my business (I bank with them also) they're going the right way about it!

Land_Registry

If GE Money are registered as a second legal charge on the title then the odds are that HSBC would have provided their consent as most of their charges contain a restriction which requires their consent to be supplied before the legal charge can be registered.

However GE may have protected the loan in some other way and hence HSBC stating that they have no knowledge.

The importance of this may not be relevant though but felt it might be worth sharing.

Dave_the_Ginger_Cat

If HSBC were not approached, they could dispute it with GE, but not sure how much they'll benefit. I think this sits with them and how the second charge was executed. It's up to you if you tell GE - can't see how they will treat you any differently but take advice from a conveyancer if you're worried

In any event, it is up to your lender the conditions that they wish to apply to this.

You'll have to go carefully on affordability here, as if you settle the GE part by way of an unsecured loan, any future lending may consider this in your income calcs.

I don't think you can get out the charge, and if you try to I think it will make the whole process more difficult.

Not had one of these come up since the early 90s when Land registry was way less automated, so not much more I can add I'm afraid

Trent1211

Thanks Dave and everybody else. I suspect my best route forward is to approach another lender and seek to have both wrapped up together.