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Legal charge
Ed-1
Posts: 3,953 Forumite
If I lend a family member the money to buy their council house and they get a legal charge registered against the property in favour of me, does there need to be a loan agreement drawn up or not as otherwise what is the charge securing?
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Comments
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The charge will state what it's securing. In this case, it'll be a fixed amount (I'd presume).
Might as well get the sol dealing with the purchase to set it up - it'll be minimal extra work.0 -
It's not a legal requirement, but it would be very sensible.
When /how do you expect the loan to be repaid?
Are you charging interest?
Do you want the ability to call in the loan early (eg your own circumstances change)?0 -
It's not a legal requirement, but it would be very sensible.
When /how do you expect the loan to be repaid?
Are you charging interest?
Do you want the ability to call in the loan early (eg your own circumstances change)?
The loan would charge interest and would be repayable on the sale of the property.
Is it possible to list these details as part of the charge or is it necessary for an agreement to be drawn up to incorporate these?0 -
No. The Charge does not specify the terms of the loan. You need a Deed drawn up.7The loan would charge interest and would be repayable on the sale of the property.
Is it possible to list these details as part of the charge or is it necessary for an agreement to be drawn up to incorporate these?
Interest eh? So how do you plan to do this?
A fixed rate throughout the term of the loan? What rate?
A rate linked to, for example, the CPI? Or BOE rate?
Charged daily? Annually? What if the rate changes mid-year?
Banks do it using complex computer programmes calculating the daily charge - can you?0 -
No. The Charge does not specify the terms of the loan. You need a Deed drawn up.7
Interest eh? So how do you plan to do this?
A fixed rate throughout the term of the loan? What rate?
A rate linked to, for example, the CPI? Or BOE rate?
Charged daily? Annually? What if the rate changes mid-year?
Banks do it using complex computer programmes calculating the daily charge - can you?
So what does the charge specify?
Is it possible to say, charge a high annual rate and state that the loan is subject to no negative equity (i.e. the amount repayable cannot exceed the value of the property)? If the home owner goes into care later in their life, the value of the property less any loan on the property is considered in a means test. So a higher loan could be to their benefit?0 -
Yes you can specify/whatever terms you wish.So what does the charge specify?
It simply states there is a Charge. eg
1.(07.01.2019) REGISTERED CHARGE dated 14 December 2018
2 (07.01.2019) Proprietor: INVESTEC BANK PLC (Co. Regn. No. 489604) of 30 Gresham Street, London EC2V 7QP.
No buyer will buy the property with the Charge in place unless a solicitor has given a 'solicitors undertaking' to remove the Charge on Completion (ie using the money paid on sale).
Is it possible to say, charge a high annual rate and state that the loan is subject to no negative equity (i.e. the amount repayable cannot exceed the value of the property)? If the home owner goes into care later in their life, the value of the property less any loan on the property is considered in a means test. So a higher loan could be to their benefit?
But if you lend them more, they will use less of their own funds to buy the property so will have mores savings which will be considered whe assessing means for care fees.0 -
Yes you can specify/whatever terms you wish.
But if you lend them more, they will use less of their own funds to buy the property so will have mores savings which will be considered whe assessing means for care fees.
Can the purchase solicitor register the charge or do I need a different solicitor to act for me?0 -
The solicitor acting for your family member in purchasing the property will register the Charge. He may well wish to see the agreement/Deed I imagine.
Whether he would also draw up a Deed for you - you'd have to ask. He may consider it a conflict of interest to be acting both for you (the lender) an your family member (the borrower).0 -
You really need to document the terms of the loan as otherwise how would anyone know the terms on which you have agreed to release the charge....0
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If I lend a family member the money to buy their council house and they get a legal charge registered against the property in favour of me...
Just to make sure... is the family member planning to get a mortgage, as well as borrowing money from you?
If so, a lot of mortgage lenders would not like that arrangement. Your family member should discuss it with a mortgage broker before going further.0
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