Borrow against charge of house.

LoveCoffee

My wife has a charge against her elderly parents home. When they pass, she gets her original loan she gave them repaid, plus interest, taken from the sale of their house. There is sufficient equity in the house to more than cover the loan and interest. Is it possible for my wife to borrow against the charge she has on her parents house?

AdrianC

She is owed money by the householder. This money may or may not be repaid at some indeterminate stage in the near or distant future. A charge is in place to ensure she is front of the queue as and when the property is sold.

She has no claim, under the charge, on any equity above what's required to settle the charge. (Whether she would inherit money from her parents' wills is another question entirely, completely separate).

She wants to borrow money against the security of a debt from elsewhere...? All that charge is is a formalised IOU.

LoveCoffee

Thanks, but didn’t answer the question! Let me simplify the question and try again - Can my wife borrow against the outstanding loan which is guaranteed by a charge on a property?

davidmcn

LoveCoffee wrote: »

Thanks, but didn’t answer the question! Let me simplify the question and try again - Can my wife borrow against the outstanding loan which is guaranteed by a charge on a property?

Simple answer - no.

In theory you can grant a charge over a charge, but that would only entitle the (new) lender to step into your wife's shoes as chargeholder, not directly to repossess the property. If she defaults then they'll want the cash, not the ability to twiddle their thumbs and wait many more years before they might see some cash.

AdrianC

LoveCoffee wrote: »

Thanks, but didn’t answer the question!

It did, actually.

Let me simplify the question and try again - Can my wife borrow against the outstanding loan which is guaranteed by a charge on a property?

Or, to simplify it differently... Can she borrow money secured against an IOU...?

To simply the answer: Would you? Nor me.

AnotherJoe

LoveCoffee wrote: »

Thanks, but didn’t answer the question! Let me simplify the question and try again - Can my wife borrow against the outstanding loan which is guaranteed by a charge on a property?

It isnt guaranteed. Its reasonably secure but there are scenarios whereby not all the money would be forthcoming and more importantly its locked away for an indefinite period so if your wife defaulted on the loan the loan company is stuck, possibly for decades.

tlc678910

Hi,
If your wife needs her money back it is her parents that would need to borrow (probably in the form of equity release) the equity release would pay your wife off, remove her charge and place their own charge in the property. It depends if the numbers stack up if that would be possible.

The interest on the equity release would eat away at the equity in the property and unless the interest was paid monthly it would compound to eat away at the equity increasingly quickly. There can be hefty early repayment charges to get out of the equity release deal.

Other options are if your wife's parents could downsize or sell up and rent.

If you don't mind me asking why does your wife need the money? Is she (and are you) in financial difficulty if she can't get a loan without security? If you and your wife want to borrow because of debt there may be better ways to deal with the debt and If you explain here (or on the debt free wannabe board) people may give you better options.

Tlc

00ec25

LoveCoffee wrote: »

Thanks, but didn’t answer the question! Let me simplify the question and try again - Can my wife borrow against the outstanding loan which is guaranteed by a charge on a property?

it did answer the question but you did not understand the answer given because you do not understand the difference between having a charge over an asset and owning an asset

a charge is not a commodity that can (easily) be sold to someone else, an asset is. You can borrow against an asset, not a charge