Private Mortgage

jstvj

I have bought a retirement flat and a family member wants to buy my house. Am I allowed to arrange a private mortgage, is this normal and will a Solicitor be able to arrange the paperwork easily ? Are there any problems I should be aware of ?

lee111s

Yes it shouldn't be a problem although I'm not sure if you have to declare any profit from interest as income.

getmore4less

The main issues are.

Terms to make it enforceable.
Make sure that the loan applies to all on the deeds.
Terms for can't pay won't pay.
Terms on your death.

jstvj

getmore4less wrote: »

The main issues are.

Terms to make it enforceable.
Make sure that the loan applies to all on the deeds.
Terms for can't pay won't pay.
Terms on your death.

Thank you. Presumably Solicitors will be able to take all these things into account.

jennifernil

I have done this for my daughter. I used a solicitor to draw up the papers to place a charge on the property, and this was registered like any other mortgage.

We also signed an agreement on the interest rate to be paid.

The whole thing cost £180.

The interest I receive is declared on my tax return, though as my income is low, I do not need to pay any tax on this.

jstvj

jennifernil wrote: »

I have done this for my daughter. I used a solicitor to draw up the papers to place a charge on the property, and this was registered like any other mortgage.

We also signed an agreement on the interest rate to be paid.

The whole thing cost £180.

The interest I receive is declared on my tax return, though as my income is low, I do not need to pay any tax on this.

Thank you, that's very helpful. Did the mortgage agreement include all the terms and conditions of a normal mortgage or did the Solicitor just draw up his own contract ?

kingstreet

You have to decide what you want.

A mortgage is the deed which ties the loan to the property. The security if you like.

You might want a loan agreement, which is more like a formal "mortgage" offer as well.

These days, the word mortgage has become synonymous with what used to be called a homeloan.

jstvj

kingstreet wrote: »

You have to decide what you want.

A mortgage is the deed which ties the loan to the property. The security if you like.

You might want a loan agreement, which is more like a formal "mortgage" offer as well.

These days, the word mortgage has become synonymous with what used to be called a homeloan.

Thank you. I want to arrange a proper mortgage, exactly the same as a Building Society or Bank would issue. Is that possible because I don't want an informal loan agreement. Thank you.

kingstreet

You'll need a loan agreement and a mortgage deed then.

Same as any other mortgage lender.

jstvj

kingstreet wrote: »

You'll need a loan agreement and a mortgage deed then.

Same as any other mortgage lender.

I now understand, thank you.

jennifernil

jstvj wrote: »

Thank you, that's very helpful. Did the mortgage agreement include all the terms and conditions of a normal mortgage or did the Solicitor just draw up his own contract ?

No, it was very simple. It just states the interest rate. That was all I wanted as I wanted it to be flexible.

The property is tenanted, so there may be months when she has no income to pay me with. In that case the interest will just keep accumulating.

As it is my daughter, I trust her to repay as and when she can, which now is regularly at the end of every month. The interest runs and accumulates automatically, we have a spreadsheet that records the interest and the repayments.

She knows if she doesn't pay, then I have the charge on the property to fall back on.

You just need to put in whatever terms you feel you need. that will depend on how much you trust the borrower.

Having a charge on the property means the owner cannot sell it without repaying you.