Loaning money from someone to buy a property

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    Loaning money from someone to buy a property

    I want to buy a property and have half the money however the bank have refused the mortgage.

    A contact of mine wants to lend me the other half of the money. I will pay him back his loan plus an agreed interest rate over a 5 year term. If I default on the repayments then he automatically owns 50% of the property.

    Does anybody know what sort of legal document or processes i need to make this happen. I'm new to the property market so would appreciate any help you can give a newbie.

    Many Thanks.

    #2
    This is the same dodgy post from yesterday but reworded.

    You should go and see a solicitor about drawing up a bespoke contract between you and the lender that encompasses all the details.

    Comment


      #3
      Before you go down this route may I enquire why did your bank refuse your loan application given that the borrowing was limited to 50%? Was it the property, your affordability or credit profile?

      Comment


        #4
        Two reasons.

        If if I remember rightly, he’s renting a property (didn’t say whether residential or commercial) but using it as a business that generates 20k in profit every year.
        Didn't say what that “business” was.
        He now wants to buy the property (or a similar one) to do the same “business” but can’t get a mortgage because 1) poor credit rating and 2) there is no mortgage product suited to what he wants to do.

        It was all very wishy-washy when I saw the thread yesterday and I assume it was deleted by a mod.

        Comment


          #5
          Thanks RedHitman , clearly falls under my views regarding Non disclosure , not really worth the effort in pursuing any further responses to Bluebull

          Comment


            #6
            Hi Loanarranger,

            The mortgage was refused on the grounds of poor credit. I have an AR marker on my credit file. It comes from rearranging a lower APR with a Barclays credit card.

            RedHitman, The reason I will not answer your questions is because you are clearly only here to troll people by posting nonsense.

            Loanarranger (or anyone else) I will of course answer any questions if you think they are relevant, I'm just looking for a bit of advice on how to proceed and what this type of contract would be called, etc.

            Comment


              #7
              What part of my reply was “nonsense”...?
              Thats exactly what you wrote yesterday. I specifically remember it all because I was intrigued.

              Comment


                #8
                RedHitman it's the way you are with people, you believe my contract is bespoke and thanks for your opinion but I want to hear some advice from other people here before I go to a solicitor. I'm sure there are other people on this forum who have borrowed money from investors because they can't get mortgages / loans etc. It happens in the business world all the time, e.g. Dragons den.

                Comment


                  #9
                  Of course it does; I never said it didn’t!

                  You asked “what sort of process/legal document will I need to make it happen”....
                  What I’m saying to you is that if you’re looking for a private investor to lend you a lot of money then this will be matter for a solicitor to draw up a legal contract for/between you that encompasses all the variables for your protection and also the lender.

                  Of course this this is why forums exist - to ask advice.
                  You want a very specific deal between you and an investor; there is no such document as a template that will exist. Therefore my advice would be to speak to a solicitor once you’ve found your investor who would be able to draw up a bespoke contract between you.

                  Good luck!

                  Comment


                    #10
                    Originally posted by Bluebull View Post
                    A contact of mine wants to lend me the other half of the money. I will pay him back his loan plus an agreed interest rate over a 5 year term. If I default on the repayments then he automatically owns 50% of the property.

                    Does anybody know what sort of legal document or processes i need to make this happen. I'm new to the property market so would appreciate any help you can give a newbie.
                    As you would own the property, the legal agreement would have to commit you to giving half of the property to the lender if you default, the agreement can't make that happen.

                    It's difficult to see how the agreement could be made binding. If you declined to give 50% of the property to your friend if you defaulted, there doesn't seem much (viable) legal action the lender could take to make it happen. You'd be in breach of contract, but the normal remedy wouldn't be to enforce compliance, it would be to compensate the lender for any loss arising from the breach - which would be the debt (which exists anyway).

                    There could be SDLT and tax implications on the "gift" - depending on the value.
                    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                    Comment


                      #11
                      Thanks for replying.

                      Stamp duty would not be an issue however your reply has helped me to see things in a different light.

                      I'm guessing the straightforward route to take would simply be that he offers me a loan that's secured against my property. As an investor he's keen to have a stake in the property which I don't want, therefore it's up to me to sweeten the deal by offering him an attractive interest rate.

                      Comment


                        #12
                        Bluebull , Might I suggest that you consult with a solicitor before signing any agreement , there are no real friends when it comes to lending and borrowing , whilst it may be laudable for someone to lend money on various understandings , if it were to go south which I hope it doesn't you definitely need to know the full implications of such instances: it really would be worth paying a few pounds for such a consultation.

                        Comment


                          #13
                          Originally posted by Bluebull View Post
                          I'm guessing the straightforward route to take would simply be that he offers me a loan that's secured against my property. As an investor he's keen to have a stake in the property which I don't want, therefore it's up to me to sweeten the deal by offering him an attractive interest rate.
                          Actually, you'll probably find that the simplest solution is to buy the property jointly with an agreement for him to sell you the property either over time (so you pay monthly but it's not a loan it's a purchase in installments) or when you have an agreed sum of money available (which might be a mortgage in a few years time, or simply savings).

                          In the meantime you both own the property and both benefit.

                          There are SDLT and CGT issues with owning more than one property you may want to consider.
                          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                          Comment


                            #14
                            In reality it should be the guy who is loaning the money getting his solicitor to draw up a suitable document.

                            I would certainly want my name on the Title if I were in his position.

                            Comment

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