LISA with a Private Mortgage

happy2B

Does anyone know if a PRIVATE MORTGAGE would meet the criteria for a LISA?
My daughter is looking to buy her first property. She has a good deposit saved in a LISA plus some additional savings. She meets all the LISA criteria - one of these is that she must buy with a mortgage.
The property she wants to buy is a good deal but is difficult to mortgage (it is leasehold and above a cafe). A family member (grandparent) could loan her the money. If this was set up as a private mortgage i.e. secured on the property, would this meet the criteria to satisfy the LISA requirement?
As far as I can see, a private mortgage appears to meet the definition of a mortgage. I have checked on gov.uk which did not specify. I telephoned their advice number. They said they did not deal with it because it was not taxable. They advised phoning the LISA provider - I said but surely you define the criteria that they follow? So I phoned the LISA provider - they didn't know and advised speaking to the conveyancer. But surely they would be in the same boat - simply following the criteria set by the government - who seem to be unable to tell me what their own criteria are!
Obviously we do not want to go down the route of committing money to this in a deposit, solicitor's bills, survey, etc, only to find that we fall at the last hurdle. Can anybody advise me for definite whether the private mortgage would satisfy the criteria? Or at least tell me who would be able to answer this question for me? Thanks.

steampowered

The legislation is here, paragraph 6(6) which specifies that (https://www.legislation.gov.uk/uksi/1998/1870/schedule):

"(6) The purchase must be—

(a)funded by a loan that will be secured by a charge over the land by way of—

(i)a legal mortgage (if land in England and Wales)"

There does not appear to be any requirement that the loan comes from a bank, so a private mortgage is possible. HOWEVER that mortgage must be properly secured by a legal charge over the land. That means a bit more than the grandparent simply providing the money: there will need to be a proper legal mortgage document drawn up which then gets registered at the land registry.

You will need a solicitor to help you with that. It isn't rocket science, but it won't be covered by your average conveyancing quote, and it is unlikely that the "conveyancing factory" type places will do anything non-standard.

It is your solicitor who should be advising you on this, as they will be the ones applying for the bonus.

K_S

@happy2b As the poster above said, it sounds like it should be possible, though that doesn't automatically translate into every conveyancer being happy to take on a scenario that they probably see very rarely, if at all.

For maximum professional assurance on whether or not you can use a LISA for a private mortgage , you'd probably need to pay a conveyancing solicitor to provide formal one-off advice on your specific question. I imagine it would probably cost somewhere from £200 upwards for that.

At the same time, I will also point out that a flat above a cafe isn't necessarily unmortgageable at high-street rates, especially if it's within the M25. So it may be worth exploring that option in parallel as well.

user1977

Also the lender will need (or ought to get) independent legal advice - it's their solicitor who needs to draft the legal charge etc.

happy2B

Thankyou everyone for your advice. 
No, it is not in London.
We are also exploring the commercial mortgage route. In some ways we would prefer this to borrowing from family. But it looks like we will need a specialist mortgage and to go through an advise/broker, which has quite a high cost relative to the small mortgage that would be needed. Plus it could be done relatively quickly as the relative would not require credit checks, proof of earnings, etc. 
If we do decide to go the private route, it will be properly set up with a charge on the house. Partly because this is a requirement for the LISA. But also because there are other younger grandchildren and we need to return the money to the pot to be fair on them in the future.