What is a Legal Charge on a Property?

When buying a house, savings for a deposit, getting approved for a mortgage and moving in are often enough to think about without getting overwhelmed. But if you’ve ever wondered what a legal charge on a property is all about, you’re in the right place. In this article, we will dive into what legal charges are and when they are applied.

What is a Legal Charge on a Property?

Think of a legal charge as a safety net for lenders. It’s a way for them to secure their interests in your property when you borrow money, usually through a mortgage. The legal charge gives the lender the right to take action if you can’t keep up with your mortgage payments. It is a legal document, signed by the borrower, which is registered by the Land Registry, informing any potential buyer of existing debt on the property.

How Many Legal Charges Can Affect a Property?

Typically, there’s only one legal charge per property. It’s like having one big lock on the door to protect the lender’s investment. However, in some cases, there might be multiple charges if you take out additional loans secured against your property. If you did want to borrow more money, secured by a second charge, you may need your existing lender’s consent. An example of this would be a secured loan on the property in addition to the mortgage. In this case, the new lender would take out a second charge on the property and your existing lender may also require your new lender to enter a deed of priority, which outlines how proceeds will be distributed in the event of sale.

Could I Have a Legal Charge If I Have No Mortgage?

Surprisingly, yes! Even if you’ve paid off your mortgage or bought your home outright, certain circumstances could still lead to a legal charge. For example, if you take out a second mortgage or a loan secured against your property, you’ll likely have a new legal charge. Many lenders release their charges automatically once you have paid off your mortgage in full.

How Will a Legal Charge Affect Me If I Am Buying a House?

When you’re buying a house, the presence of a legal charge isn’t something to panic about. It’s just a standard part of the process when you’re getting a mortgage. Your lender will register the legal charge against the property to protect their interests until you’ve paid off your mortgage.

How Will a Legal Charge Affect Me If I Am Selling a House?

As a seller, having a legal charge on your property won’t stop you from selling it. However, you’ll need to pay off any outstanding mortgage or loans secured against the property before you can transfer ownership to the buyer. The legal charge will need to be removed from the property’s title before the sale can proceed smoothly.

What Does a Restriction Against My Title Mean?

A restriction on your title is like a caution sign for potential buyers and lenders. It notifies them of certain restrictions or conditions that affect the property. For example, if you’ve agreed to share ownership of the property with someone else, a restriction will ensure they’re aware of this arrangement.

If a Family Member Lends Me Money for a House, Do They Need to Register a Charge?

If a generous family member lends you money for a house, they may want to secure their loan with a legal charge. Although it may seem formal, it is a way to protect their investment and ensure they’re repaid if things don’t go as planned. An example of this is if your circumstances change and you lose the house, your family members should be able to get their money back. Legal charges can be tailored to an individual situation and can include details on whether there would be any monthly repayments or whether the funds would be repayable on the sale of the property only. Just make sure you’re both clear on the terms of the loan and seek legal advice if needed.

What is an Example of a Legal Charge on a Property?

Let’s say you’re buying your dream home with a mortgage from the bank. To secure their loan, the bank registers a legal charge against the property. This gives them the right to take legal action if you fall behind on your mortgage payments, ensuring they can recover their money if needed.

In conclusion, the legal stuff can sound scary, but it’s all about protecting everyone involved in the home-buying process.

If you are looking to get a mortgage check out our directory of mortgage brokers near you  and if you need support with the legal aspects of mortgages you can find a local conveyancing solicitor .

Happy house hunting!