"If this loan is a first Mortgage" terminology question pls

[andrew1]

I have an agreement document which states:

 

" If this loan is going to be a first mortgage, you ask and authorise us to use part of the loan facility quoted above to repay any existing mortgage or charge on the property"

 

Now, please think carefully before answering this, the devils in the precise detail.

 

I need an interpretation of the words "First mortgage"

 

This is a 2nd charge loan and nothing to do with the 1st charge head mortgage.

 

it says on the agreement document "If this loan is going to be a first mortgage" well it wasn't, so does that change the authority to pay another 2nd charged loan in existence when I took out the loan - or can it be seen as an authority to do so. It's a document we signed. Forget about whether all loan companies do need a clear charge so they clear the loan that is not the issue, I've got that covered already - I just need someones interpretation of the quotes above.

 

Thanks

[ananya]

I would interpret that as they can only use part of the loan money to pay off any existing charges on the property, if the loan you are taking out is the first mortgage.

 

If it's a second mortgage then no, I would say that they can't

[make them aktiv runners]

"First mortgage" means 1st charge on property.

 

As you say it is a "2nd charge loan" it could still be covered by increasing the existing mortgage. It all depends what was in the mortgage paperwork and on the deeds immediately prior to requesting this loan. To be covered by the existing mortgage arrangement there will some words like "any further advance" in both the paperwork and deeds pre loan.

 

Remembering your CCA v mortgage discussion, I found an article relating to changes effective from April 2008, it was written in May 07 so the upset lenders may have since encouraged DTI to change the legislation to their favour.

 

Consumer Credit Act 2006 – concerns for mortgage lenders - MFG :: Legal - Mortgage Finance Gazette UK

[andrew1]

Hey, thanks Aktiv, this is not a further advance but a separate loan company - similar argument to the other you refer to but a totally separate company. Thanks for the link.