A mortgage is just a fancy name for the debt you take on to buy a property, in agreement with a bank or building society (similar to a bank). You pay interest on this debt.<\/p>\n\n\n\n
A mortgage host is someone who takes out a mortgage in their name for a property that an investor is buying. Reasons the investor could use mortgage hosts are: credit issues, age, or employment.<\/p>\n\n\n\n
Imagine I walk into a shop and I want to buy some cigarettes, but the shopkeeper won\u2019t sell them to me because I can\u2019t show my ID. So I come out of the shop, and I tell you that I can\u2019t buy cigarettes because I don\u2019t have my ID. You agree that it\u2019s okay – you remembered your ID – so you\u2019ll buy them for me.<\/p>\n\n\n\n
So you go into the shop. You tell the shopkeeper that you want to buy some cigarettes (and, unlike cigarettes, you can tell her you\u2019re buying them for your friend outside, and the shopkeeper doesn\u2019t mind).<\/p>\n\n\n\n
But cigarettes are really<\/em> expensive. They\u2019re like \u00a3100,000 a pack. <\/p>\n\n\n\n To undergo the process of buying a cigarettes, the shopkeeper needs you to get two things (they come as a package deal):<\/p>\n\n\n\n So you ask the shopkeeper if she\u2019ll give you some debt, please, so that you can buy the cigarettes. She says yes, but she\u2019ll only give you 75% of the purchase price of the cigarettes. In this case, that means the shopkeeper will only give you \u00a375,000.<\/p>\n\n\n\n But the cigarettes cost \u00a3100,000. And you do not, unfortunately, in your wallet at this particular moment in time, have \u00a325,000 in cash. But that\u2019s okay, because although I forgot my ID so we\u2019re in this pickle, I did somehow remember to bring \u00a325,000 in my banknotes. I suppose with all that physical cash, there wasn\u2019t space in my wallet for my ID, too.<\/p>\n\n\n\n So you now have your \u00a375,000 from the shopkeeper, and \u00a325,000 of cash from my wallet. You put it together, so now you have \u00a3100,000, and you exchange that value for your pack of cigarettes.<\/p>\n\n\n\n Now, you have a pack of cigarettes. You give them to me, and we absolutely, 100%, confirm, just in case you forgot in all that excitement in the store, that these aren\u2019t your cigarettes: you bought them with my money, for me.<\/p>\n\n\n\n But now I have cigarettes, and you have a debt. That\u2019s not very fair. I\u2019m sure you\u2019d take lung cancer over debt any day. It\u2019s much cooler to be coughing than to be in debt. Your debt needs to be looked after. The shopkeeper says you can keep the debt: don\u2019t worry about paying any of it back right now – but she does want you to pay her a bit each month, for the privilege of holding the debt. You\u2019re effectively renting the money off her.<\/p>\n\n\n\n I agree, of course, to pay you the money you need every month to keep the shopkeeper happy.<\/p>\n\n\n\n In mortgage hosting, cigarettes are properties, shopkeepers are important professional people: mortgage brokers and solicitors, you\u2019re a mortgage host, and I\u2019m an investor. In the real world, here\u2019s a summary of what just happened:<\/p>\n\n\n\n The investor provides all the funds: the deposit, and any refurbishment costs.<\/p>\n\n\n\n To have a mortgage in the name of the host (so you owe the money) means that you also have the property title in their name. The title is the statement on Land Registry that says who owns the house.<\/p>\n\n\n\n All of the equity in the property (the asset) is in the host\u2019s name, not the investor\u2019s name.<\/p>\n\n\n\n The investor and the host have a written, legal agreement stating that the equity in the property and any growth in capital belongs to the investor.<\/p>\n\n\n\n This needs to be registered with Land Registry, which can be costly. If this Title of Deeds is not registered with Land Registry, the host can attempt to claim the house as theirs and sell it behind the investor\u2019s back. <\/p>\n\n\n\n The investor can sue for this, but by this point, the host may have sold the house successfully.<\/p>\n\n\n\n It\u2019s a complicated question, because it depends what you mean by \u2018ownership\u2019. The term gets thrown around loosely. We can say that the investor owns the house, and the host owns the debt. However, unless the Title of Deeds transfer is registered with the Land Registry, Land Registry will say that the host \u2018owns\u2019 the house.<\/p>\n","protected":false},"excerpt":{"rendered":"\n
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Who provides the funds?<\/h2>\n\n\n\n
What is a Title of Deeds?<\/h2>\n\n\n\n
Who \u2018owns\u2019 the house?<\/h2>\n\n\n\n