Private Mortgage

Thrugelmir

jstvj wrote: »

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.

There's a fundamental difference though. As you aren't lending money as such. Far easier for the family member to arrange their own mortgage. Then you'll receive all your money upfront.

Legal fees will be considerable if you wish to have a bespoke agreement drafted. Not only for you but your buyers as well.

jennifernil

I don't know that that is necessarily the case, though I suppose it would depend on how complex it all is.

If the seller is not receiving the full price for the property at the date of sale, then they are lending the money to the buyer.

My solicitor prepared the "charge" document, which is the same as any other lender would have, all properly registered against the property.

That was the bulk of the cost.

Then he asked what I wanted in the loan agreement. Presumably there is some sort of "standard" mortgage wording? With all the usual terms and conditions?

I have no idea, as all I wanted was to formalise the rate of interest we had agreed on.

I then sent the amount of the loan to my daughter.

Thrugelmir

jennifernil wrote: »

I don't know that that is necessarily the case, though I suppose it would depend on how complex it all is.

Dates and amounts of payment of principal and interest;

Power to vary the rates of interest charged and on what basis;

Obligations to insure and maintain the property etc;

Restrictions on letting;

Rights and powers to repossess and sell the property.

jstvj

Thrugelmir wrote: »

Dates and amounts of payment of principal and interest;

Power to vary the rates of interest charged and on what basis;

Obligations to insure and maintain the property etc;

Restrictions on letting;

Rights and powers to repossess and sell the property.

As Jennifernil has said, surely the Solicitor would not have to write an agreement from scratch, they must have a template or there are numerous examples out there to form a basis for the agreement. As to their getting their own mortgage, so I could have all the money up front, nice idea but they could not come up with the deposit required and in any event I would be giving them a preferential rate to help them out, which is the whole idea.

Thrugelmir

jstvj wrote: »

As Jennifernil has said, surely the Solicitor would not have to write an agreement from scratch,

How many solicitors spend their time drafting "private" mortgage contracts?

jstvj

Thrugelmir wrote: »

Legal fees will be considerable if you wish to have a bespoke agreement drafted. Not only for you but your buyers as well.

Exactly ????????

jennifernil

I don't know how common or uncommon these things are, but when I asked the solicitor if he could organise it for me, I got the impression that he thought it quite straightforward, and that the various clauses that would go into it were pretty standard.

I asked how much it would cost and he gave me a total price. £250 if I remember correctly.

However my daughter already owned the property outright, so no conveyancing was involved. This was purely a mortgage to release funds to use as the deposit on another property. A "re-mortgage" I suppose.

I would expect there to be a further charge to pay when the mortgage is redeemed.

As you will be selling the house to them, the costs for you will be what you would normally pay when selling.

When someone buys a house their solicitor normally also acts for the lender in the drawing up of the mortgage deed, so your relatives will have their purchase costs plus the mortgage costs.

When we decided to go ahead with it and I told him that the agreement would be very simple, the bill ended up only £180, presumably as there was less work involved than he had anticipated. My daughter paid the £180.

He drew up the charge on the property, my daughter signed it and it was then sent to be registered (we are in Scotland). The proof of registration was later returned to us.

We both went to his office and signed the agreement of the terms of the mortgage.

She could have taken a commercial BTL mortgage, but the arrangement fees for those are quite high. Instead, she saved money and I gained by having my savings earning a higher rate of interest than the bank was offering me.

I suggest you think about what you want in the agreement, then approach a few solicitors to see what they advise, and what they would charge.

Your relatives should seek advice too. I would think that you should each employ separate solicitors, but take advice on that.

jstvj

Thank you Jennifernil. All I want is a standard mortgage agreement the same as issued by Building Societys/Banks and I feel sure the Solicitor will have a template for that, which can be changed to meet any special requirements that I may come to mind.

We had intended consulting one Solicitor to act for both parties, but I am sure that if they think there is a conflict of interests, one side will be referred to another firm.

My Daughter in Law wants the property and initially I have offered them a preferential rate fixed for five years, which they have agreed to in principle. However, they need to be certain for all parties concerned that they can continue to afford the mortgage after the fixed rate expires, which I have assured them will remain preferential, compared with market rates.

Mattygroves2

Any decent solicitor will at least advise you get independent legal advice.

Instead of fixing the interest rate for 5 years and then needing a new agreement drawing up why not make it a tracker interest rate so you only need one agreement for the length of the loan ? Or fixed for 5 years and then move onto a tracker ? Otherwise you'll need a new agreement every time the interest rate changes (lawyers fees every time) and your son / DIL won't have certainty (or anything more than an unenforceable promise) over the rates they will face.

You also need to think carefully what you would do if they couldn't (or won't) pay. Would the unpaid interest roll up or would you be happy to repossess ?

No point having a legal agreement unless you're willing to enforce it. If you're not willing to repossess in any circumstances you might as well gift them the property and have an informal agreement for repayment of the capital or simply for them to pay you an allowance each month to fulfill your income requirements.

JimmyTheWig

What are the implications of this if the OP needs to pay care home fees?