This case was the second of two mortgages we arranged for our customer who is a discharged bankrupt. We arranged the original mortgage for a purchase of a new build and he returned shortly after to borrow additional money for his use by his Mother.
You may be aware that most Mortgage Lenders require you to wait 6 years after the bankruptcy has expired before they will lend, and he was discharged in 2015.
The timeframe was important as he was keen to fund the decoration his Mother’s house to make her life easier and enjoyable for her as soon as practicable.
THE PROBLEM
- Discharged bankrupt in 2015.
- Refinance of a recently bought new build mortgaged property.
Mortgage lenders generally do not like lending within 6 months of ownership and particularly on New Build properties, as the second hand value can take a dip in the same way buying a brand new car does. - Currently in a fixed period with high early repayment charge.
- First charge mortgage lender does not offer further advances.
This not uncommon for specialist lenders who often sell their mortgages on. - First charge mortgage lender would not provide permission for a second charge.
This does depend on the lender as it protracts the legal proceedings in the event of default. This particular Mortgage Lender can soften its stance after 12 months of ownership but that was still too long in the future for the client to wait. - Raising money for the benefit of another.
The Mortgage Lender’s main concern here is undue influence which could result in the applicant losing their home.
We also identified (unbeknown to the client) during the process that the client’s original legal representatives and developer had failed to register the purchase on Land Registry.
Delving deeper and it was discovered the bankruptcy discharge was not registered in the correct way either.
Everything pointed to waiting.
THE SOLUTION
As he had not long purchased the property he was still inside his fixed rate so a remortgage would be ill-advised due to the size of the early repayment charge. The Mortgage Lender he was with does not provided further advances which is was understandable as this is the norm for specialist lenders. He was therefore limited to the second charge mortgage market.
Niche Advice recommended a second charge mortgage lender that works on the basis on an ‘equitable charge’ rather than traditional charge on the property. This legality meant the existing first charge lender was powerless to prevent a second charge being put in place.
The Mortgage Lender identified was willing to complete even though the bankruptcy was registered incorrectly. Prudently they simply advised that the client looks into amending this for their own future financial well-being.
Further compromise was provided on the reason for the funding which did not directly impact the applicant. The Mortgage Lender said this hurdle could be overcome provided legal advice was taken.
Also working with the Mortgage Lender; Niche Advice also smoothed over the client’s non-disclosure of a car loan picked up during the process, the property being a recently purchase new build, and the fact the existing lender is a “sub-prime” one.
All this meant the client did not have to wait for the funds and was extremely grateful.
