Philippa Rudd - EDP Property Column. Security on the family home
My husband’s business is not doing well at the moment and the bank tells him that if he wants to borrow any more money he will have to put up our home as security. He tells me I will have to sign some papers, although the business is nothing to do with me. Why is this?
It sounds like the bank want to put a charge (mortgage) on your home, so that they will have the benefit of the property as security in the event that your husband’s business fails.
What would this mean?
If the business fails, you could lose the property. If any payments to the bank are not met, they can enforce the mortgage by taking court proceedings to evict you and any other occupiers from the property in order to sell the house, in order to obtain repayment of the money owing to them.
Should I refuse to sign? I don’t want to risk the family being homeless!
Difficult decision. Before signing, you will need independent legal advice and you will need to ask your husband for full details of the business’s borrowings and other liabilities so you can weigh up the risks yourself. You may need to take advice from an accountant. Do also bear in mind that the charge can secure all monies owing by your husband or his business to the bank, including further advances and existing loans that you may not be aware of.
What if my husband insists that I sign?
The bank will need confirmation that you are signing of your own free will. Otherwise if things go wrong you could refuse to vacate the home, claiming that you signed under duress or without understanding the paperwork. This is why the bank insists on your having your own solicitor.
What do you think I should do?
You should not agree to the arrangement if you think the risks are too great. If you are generally willing, but find certain terms unacceptable, then you may be able to renegotiate certain terms with the bank. You will need to assess the likelihood of your husband’s business failing before you give your consent to the charge.