Developer's Bank Guarantee

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Arthur
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Joined: 20 Oct 2009 20:29

Developer's Bank Guarantee

#1 Post by Arthur » 28 Oct 2009 20:30

Hello, I wonder if someone might be kind enough to advise whether the developer will be required to provide some form of bank guarantee in case I default on my mortgage? I am unsure how my mortgage provider would be legally entitled to pass on such debt to the developer. We are trying to buy a resale from the current (first time) owner but the developer is insisting we pay him a not insignificant sum for him to provide such a guarantee.

Many thanks in advance.



Nigel Howarth
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Re: Developer's Bank Guarantee

#2 Post by Nigel Howarth » 29 Oct 2009 11:18

Hello Arthur and welcome to the forum.

If you are taking out a mortgage to buy a resale home that has yet to have its Title Deed issued, the property itself cannot be used as collateral against the loan.

In situations where Title Deeds have yet to be issued, the developer acts as the guarantor for the mortgage. So if you default on payment, the bank will go after the developer for its money, and the developer will come after you.

I have not heard of developers charging people to act as guarantor before - what does your lawyer thing about this?

Also, has your lawyer had the Land Registry carry out a search to ensure there are no 'encumbrances', such as a mortgage, lodged against the property?

Regards,


Nigel Howarth
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