First charge on property through loan.

GoldenOldy

User1977. Thankyou for clearing that up. One less worry. 

sheramber

GoldenOldy said:

Thankyou. Thats all good to consider.

Here are my thoughts to mitigate, what do you think?
so no mortgage involved.
i am not as far as i know the main beneficiary of their will.
I will pay the buildings insurance.
I will loan 1/2 the max amount the er company is willing to loan to mitigate the possibility of falling prices (so 1/4 of the property value)
I will create a lifetime possession clause (i think i may have just made that up!), so they may live there irrespective of what happens to me.
I do not need the money back in my lifetime, however should something catastrophic occur, i could ask for repayment and they cold then take out the equity release.

Does this all sound feasible do you think?

I will create a lifetime possession clause (i think i may have just made that up!), so they may live there irrespective of what happens to me.

Who will be responsible for dealing with collecting the interest payments , paying tax due on them  and the refund of the money ultimately?

Would thst involve ongoing costs for that service?

Wil you be taking professional advice on doing this?

GoldenOldy

Sherambler.
This is what I had in mind

get a lease drawn up by a solicitor to mirror the type given by equity release providers.
The interest will ‘roll up’ , just an equity release providers is, and would be payable from the deceaseds estate, by their administrators on death.
If i should pre decease the recipient of the loan, they will have the legal right to occupy the property until their death.

I am unsure of the tax position.

AskAsk

SDLT_Geek said:

I wonder if you will get caught by consumer credit protection rules.  I think they might apply where the loan is by way of business.  It might be that those rules would not apply if this is a "one off" for you.

we came across this when my ex wanted to give his parents a loan and put a charge on the property that they were proposing to buy.

we couldn't find a solicitor that would do the charge for us as they don't have knowledge in this area and the one we found dealt with equity loans, but for businesses.  the solicitor said you can't put a charge on a property without risks as you aren't authorised under the financial conduct authority to lend money, so you are starting off on the wrong foot, so to say.  it doesn't matter if you are doing it as a one off, you aren't legally allowed to lend money and hold assets as collateral without a licence, and you certainly aren't allowed to charge interest on the loan as you don't have a licence to do this.

so if it came to it, and there is a dispute, you could actually lose the charge as it was put there "incorrectly" in the first place if it was ever investigated.

GoldenOldy

AskAsk,Thankyou, Thats most useful. That is a problem then. Oh Dear. I was attempting to mitigate hefty equity release interest rates. Back to the drawing board then!. If anyone else has any good ideas they would be welcome. I dont really want joint ownership if possible ,due to Stamp Duty etc.
Thankyou.

AskAsk

GoldenOldy said:

AskAsk,Thankyou, Thats most useful. That is a problem then. Oh Dear. I was attempting to mitigate hefty equity release interest rates. Back to the drawing board then!. If anyone else has any good ideas they would be welcome. I dont really want joint ownership if possible ,due to Stamp Duty etc.
Thankyou.

i think charge on a property sounds very simple and straightforward when you read articles on the internet, but this is where things go wrong if you rely on your research of articles you found on the internet! as reality often is very different to articles you found on the internet!

a charge on a property is often done by businesses, like a bank, who are licenced to lend money and hold assets as collateral, or by a court order because someone is owed money.  but it is not often put on by individuals giving a loan to the property owner.  sure, people will lend their friends and family money to buy a property and a loan may be written up, but it often never becomes a charge on the property as these loans tend to be low in value (not a lot of people have loads of cash lying around to lend like a bank!) and so it doesn't require the full legal process of putting a charge on the property at the land registry.

you can test this by calling solicitors and ask if they would act for you to put a charge on the property as you described and see what the responses are.  you will be surprised to hear that most will not take this job on.

user1977

AskAsk said:

SDLT_Geek said:

I wonder if you will get caught by consumer credit protection rules.  I think they might apply where the loan is by way of business.  It might be that those rules would not apply if this is a "one off" for you.

we came across this when my ex wanted to give his parents a loan and put a charge on the property that they were proposing to buy.

we couldn't find a solicitor that would do the charge for us as they don't have knowledge in this area and the one we found dealt with equity loans, but for businesses.  the solicitor said you can't put a charge on a property without risks as you aren't authorised under the financial conduct authority to lend money, so you are starting off on the wrong foot, so to say.  it doesn't matter if you are doing it as a one off, you aren't legally allowed to lend money and hold assets as collateral without a licence, and you certainly aren't allowed to charge interest on the loan as you don't have a licence to do this.

so if it came to it, and there is a dispute, you could actually lose the charge as it was put there "incorrectly" in the first place if it was ever investigated.

The solicitor was incorrect, as explained above - there are no regulatory requirements where your lending is not in the course of a business.

Hoenir

GoldenOldy said:

I do not need the money back in my lifetime, however should something catastrophic occur, i could ask for repayment and they cold then take out the equity release.

They might be happy with the arrangement as it is. Then what do you do. Or the new lender might consider there's inadequate security in the property for them. 

Loza2016

My in laws gave us money in 2020 to buy a house as cash buyers. They put a charge on the property & the family solicitor draw up the agreement we would be charged interest in line with Bank of England rates. Although we did pay of the loan once the property was mortgageable & they didn’t charge us the interest in the end as they could afford not to. 

From what I remember if you are charging interest you are legal obliged to produce yearly statements like a mortgage company does. 

GoldenOldy

Thanks for the latest posts.
All good points for consideration.