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House as a "security"

• Message 1. 

  Posted by rick_yard_withdrawn (U14573092) on Sunday, 28th August 2011

  What exactly are the mechanics if the loan cannot be repayed, and the "security" clause is invoked? Alice and Christopher talked about a £40k mortgage, but the house is worth more than that. Do the creditors assume ownership of the house but pay them the balance that exceeds £40k? And who would the mortgage be with? The creditors? Or would they transfer the debt to a buidling society (or similar)? Sorry, I can't get my head round it....

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• Message 2

  , in reply to message 1.

  Posted by Harvest_Supper (U11428442) on Tuesday, 6th September 2011

  If a loan of £40,000 is secured against a, say, £200,000 house, then if the loan is not repaid the person owed the money can force the sale of the house and take their £40,000 from the proceeds. Any remainder would then pass to Chris and Alice.
  
  One problem that arises is that when a sale is forced in this way it is often via auction or some other 'quick' means, and does not ensure the best price is received.
  
  (During the recession of the early 1990s I bought a flat that had been sold by the previous building society, the prior owners having failed to pay their mortgage.)

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• Message 3

  , in reply to message 2.

  Posted by rick_yard_withdrawn (U14573092) on Wednesday, 7th September 2011

  Oh I see, thanks! But they were talking about taking out a £40,000 mortgage, with the house as security. This is so they could pay off the £40,000 debt. Would that generally be an option people would take (if they could afford that "small" repayment/interest. If they couldn't repay the £40,000 loan how could they repay the mortgage - and if it's so much easier to repay the mortgage why wouldn't they take out a mortgage in the first place to raise the funds rather than a loan? I'm confused...

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• Message 4

  , in reply to message 3.

  Posted by Organoleptic Icon (U11219171) on Thursday, 8th September 2011

  Nick - it is not you that is confused it is the scriptwriters.
  
  Exactly what would happen would depend on their circumstances after a default - as Chris might be jobless or employed, etc.
  
  In practice, Bank of Brian would cover it.

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• Message 5

  , in reply to message 4.

  Posted by Mabel Bagshawe (U2222589) on Thursday, 8th September 2011

  I heard it as them going to the bank for a (presumably short-ish term) loan of £40K, which the bank decided they would give but given their risk profile with the back up of a physical asset as security.
  
  Not sure why ths isn't just a having a mortgage to raise the money, unless the bank have categorised it as a buisness loan to "Christopher Carter trading as Hunky Farrier.com" rather than a personal loan ?

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• Message 6

  , in reply to message 5.

  Posted by Organoleptic Icon (U11219171) on Thursday, 8th September 2011

  It IS a mortgage - but the bank will have packaged it differently to justify higher fees and interest.
  
  It would have been FAR more sensible to borrow from Brian - on the logic advanced by that loan shark character about not giving the bank a fat margin.

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• Message 7

  , in reply to message 6.

  Posted by Reggie Trentham (U2746099) on Thursday, 8th September 2011

  It would have been FAR more sensible to borrow from Brian - on the logic advanced by that loan shark character about not giving the bank a fat margin 
  
  
  Of course it would if they were just looking at it in terms of interest rates and ease of repayment. But half the point of the story was that they, and Chris in particular, wanted to be independent from and not beholden to Brian.
  
  I don't see any problems about this aspect of the story. They got a loan from the bank using the cottage as security, the terms of which we weren't told and don'treally need to know from the point of view of the plot line.
  
  We do know that Brian has said, in private to Jennifer, that he won't let them lose the cottage if they get into trouble with the loan.

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