Private mortgage

Malg

I want to lend money to one of my married siblings to remortgage their house. They had a fixed rate which has come to an end and the new rates being quoted because of the new rules are extortionate even at a 50% Loan To Value. However I want it all done proper and above board with a contract and a lien on the property as any lender would, just in case of unforeseen circumstances and with me declaring the interest payments as income. Does anyone know of a specialist service provider in this area or would a typical family solicitor suffice?

Malg

Pixie5740

Would you married sibling still require a mortgage from a bank or building society as well as the private mortgage from you? If so then the idea is a non-starter.

If the only mortgage they will have is the private mortgage with you then yes you can have a charge put against the property and have a legal document drafted with details about repayments, terms, etc. Remember that if you charge interest you may have to pay tax income tax on it.

Malg

The money provided by me would be the only mortgage/charge on the property and yes I realise that I would have to pay tax on the interest but as long as the interest covered the kind of rate I could get it if I invested elsewhere (which I would also have to pay tax on) then I would be happy. Maybe even make it BoE rate plus 2% giving me ineffect 2.5% at the moment and covering any future rises.
I realise that I could probably get a better fixed rate for the 10 year term that they want the money over but I would be happy if it cover a decent 2-3 year fixed rate.

What I really want is the expertise to ensure that if there was a divorce, bankruptcy, or some other such issue that the lien on the house to cover the loan was recognised in any settlement.

I see it as a secured Peer to Peer type loan and think that there may be scope for others, perhaps someone else has actually done this and can advise?


Malg

Lungboy

Malg wrote: »

They had a fixed rate which has come to an end and the new rates being quoted because of the new rules are extortionate even at a 50% Loan To Value.

That seems odd, I just stuck a £120k mortgage on a property valued at £240k into the MSE remortgage best buys calculator and the top mortgages are sub 1%.

AndyT678

Malg wrote: »

the new rates being quoted because of the new rules are extortionate even at a 50% Loan To Value.

2 year fixes are available from 0.98% on 65% LTV and 5 year from 2.19% on 60% LTV.

What do you call extortionate and how much were you proposing to charge?

Clive_Woody

Have you asked yourself what you would do if they stopped paying or couldn't pay? Would you evict them?

Are you 100% that you will not need this money in the short term (i.e. before it is repaid in full)?

Sorry to be blunt but there are so many tales of woe when lending to friends and family

burlington6

Simple answer, don't do it

Pixie5740

Yes a 50% LTV mortgage should attract a better interest rate than BoE +2%. If your sibling cannot achieve a better interest rate than that with 50% LTV then it sounds like a sub-prime mortgage rate and you would want to ask yourself why only sub-prime rates are available to him/her.

dealer_wins

Only lend to family and friends what you will in all probability not get back!

Think of it as a gift, and if you still can genuinely say you would be 100% happy gifting the money, then gift it with no expectation of repayment.

Proper and decent friends and family would repay you, but its about a 10% chance judging by the threads on here!

robatwork

I'm another one in the "don't" camp.

When it's family or friends, either gift them the money, or stay away.

Even if it's backed up with a watertight contract you will either lose your money, or lose your sibling.