second charge

[kent18]

I have a so called friend that needs me to lend him �60,000 he owns 20 properties but is behind with mortgages with cash flow problems.He has offered second charge on a property thats worth �120.000 and only has a �46.000 mortgage.however he is behind with other mortgage payment to other lenders,if these other lenders go for bankrupcy in the future will the property i have second charge on be at risk or could i offer to take over the full mortgage if he gets in real trouble.Comlicated or what.I want to help him,but at what risk.someone help.

[themas]

If he is made bankrupt all his assets are at risk.

Normally, secured lenders rely on their security (i.e. the property their debt is secured on) & do not prove in the bankruptcy. But the Official Receiver in effect becomes the owner of all the bankrupt's property and can look to sell it to realise the equity for the creditors who have proved in the bankruptcy. If it was sold at a price which realised enough to pay off the first mortgage and your second charge then you would be OK, because these rank above the OR's interest.

The OR would not usually be interested in selling unless there was going to be some equity available to creditors, so you should be OK unless something went wrong in the sale process and the property was sold for less than the amount of your charge and the first mortgage.

You could get more info. on this from Insolvency Service website - or go from there to their information helpline or e-mail service.

Apart from the bankruptcy issue, you also need to consider how long it will be before you want to get your money back, what will happen if it is not repaid when you want it, what interest you will get etc. (In principle you can go to Court for an order for sale if the borrower breaks the agreement.) All this needs to be set out in a proper legal document (in effect, a second mortgage). You also need to satisfy yourself that there really is sufficient equity in the property to give you comfort, even if house prices decline further.

Consider that this friend is clearly, from what you say, in a bad way financially already - is it really wise to lend him a substantial amount, even with some security? It might all work out OK, or you could have an awful lot of hassle for a long time to get your money back.

[puddicat]

Dont know much about money, but kent dont bother look after number one you!!!!

[kent18]

to'Themas.Thank you for your reply.iappreciate all you have said.I do intend to take advise from my solicitor before i give him a penny.But he is not a bad man he is more of a bad business man and has tried to run before he can walk.he has over streached himself,he has about �3m in property and owes �2m in mortgages,has bought the last 4 properties and they are not complete to let.But nothing is selling ,he just cant off load any property.My fear is ,is �60k going to turn his business round,I dont think so.Me lending him �60k will only delay what i think is the inevitable,probably early next year.I cant afford to loose �60k its all i have,but if there is a chance i could save him i have to give it a go .but still need to know i will gat my money back sometime.Thanks for you input.Kent18

[kent18]

To.pudicat.Thanks for your answer.My problem is i allways think about others before myself and if i can help i will.But 60K is a lot to risk.I am realy torn about what to do.Thanks anyway.Kent18

[bednobs]

to me this is an absolute no brainer. You are not great mates with this prson by the sound of it, and you are already expressing doubts

[happyone2]

If you feel you have to help this friend out I would be tempted to say to him that I want a �60k charge put on two or three properties and that when the debt is repaid (with appropriate interest in full) all the charges will be stopped.

That way he will be showing he is committed to doing the right thing by you and you may be more assured of repayment.

However to be honest in this market his 3m won't be worth 3m in 6 months time it'll be worth 2.5 or maybe even just 2m then there will be no equity left at all.

Just because he isn't a bad person doesn't mean you'll get your money back. A bad business man is a bad investment.

[pink-kittens]

Why, when you know this man is defaulting where ever he turns would you even think about lending him �60,000 that you can't afford?

You would be mad to lend it too him however many charges you put on his '3m'. Don't forget, averaging out all that the houses are worth, you then must deduct �30,000 per house this month alone and who knows how much more over the next 12/24 months?

A fool and his money are soon parted - not that I am saying you are a fool but your 'friend' is treating you like one. Tell him to sell 3 or 4 or more of his properties to pay off his debts (those with any equity anyway) then no one else can or will be dragged into his debt situation

[terambulan]

Go for it.....ur friend is obviously better at spending your money than you are - and your further action will prove it!

[themas]

Your additional information makes me feel I must agree with those people who say that you should not go ahead with this. Your friend is clearly not a good business man and the scale of his problems certainly appears to be such that �60K is most unlikely to see him in the clear.

If I were you I would certainly not consider at all letting him have all by savings in this sort of situation - regardless of the amount of "security".

[kent18]

Thanks to everone that contributed to my question.all of you are correct in what you have said.Just wanted other peoples oppinions as i am maybee too close to the situation.Thanks all.

[daisycup]

Bad move I think. Friend or foe, don't lend him the money. You'll regret it in the end if you loose your money. I think it is tricky lending to friends... I definitely wouldn't do it if I was you.