Freehold conveyancing process – (2) Buyer’s funding of the purchase Flashcards
What are the two ways to fund a property purchase?
(1) Cash buyer: involves Anti-Money Laundering (AML) checks and establishing the source of funds and wealth. (2) Mortgage: involves borrowing from an institutional lender who takes a mortgage over the property as security for the loan.
What is required for a cash buyer in the conveyancing process?
AML checks and verification of the source of funds and wealth.
What happens when a mortgage is taken out by the buyer?
The lender takes a charge over the property, which appears on the Charges Register.
What is the typical deposit amount when purchasing a property?
Most buyers typically put down a 10% deposit.
Who usually acts for the lender in a mortgage transaction?
The buyer’s solicitor (BS) often also acts for the lender, which may create a conflict of interest. The BS can only provide generic advice regarding the mortgage.
Why is independent financial advice important for a mortgage?
A mortgage is a financial product, and clients need to understand their options and obligations before proceeding.
What are the four types of mortgages?
(i) Repayment Mortgage, (ii) Interest Only, (iii) Endowment, (iv) Sharia-compliant.
What is a Repayment Mortgage?
The borrower makes monthly repayments that include both capital and interest, ensuring the entire loan is paid off by the end of the term.
What is an Interest Only Mortgage?
The borrower only pays the interest on the loan during the term, with the capital due at the end, requiring alternative arrangements to pay off the principal.
What is an Endowment Mortgage?
A mortgage linked to a life insurance policy intended to pay off the mortgage balance when the policy matures, but has fallen out of favor due to insufficient payouts.
What is a Sharia-compliant mortgage?
A financing arrangement that adheres to Islamic law principles.
How must a mortgage be created?
A mortgage must be created by deed.
What is a Certificate of Title?
A document submitted to the lender confirming that the title is good and marketable, typically submitted 5-7 days before funds are required to release the mortgage advance.
What is the role of an occupier’s consent form in a mortgage transaction?
It confirms that non-owning occupiers (e.g., adult children living with the buyer) will vacate the property if the lender needs to repossess. They should seek independent legal advice.
What must be done post-completion regarding the mortgage?
The mortgage must be registered in the Charges Register within 30 days for registered titles and within 2 months for unregistered titles. If the buyer is a company, registration must also occur at Companies House within 21 days.
