Finance and Lender's Requirements

Introduction

Almost every property purchase is funded, at least in part, by **borrowed money**. This chapter examines how a buyer raises **mortgage finance**, the **types of mortgage** available, and the special considerations that arise when a solicitor **acts for a lender** as well as a borrower. You will learn the main **sources of finance**, the difference between a **repayment mortgage** and an **interest-only mortgage**, the documents a lender issues (the **mortgage offer**, **commitment letter**, **term sheet** and **facility agreement**), the duties owed when acting for both borrower and lender, and the purpose and contents of a **Certificate of Title**.

Assessment focus

For the SQE1 FLK1 assessment, you must understand the **practical mechanics of property finance** and the **professional-conduct dimension** of acting for a lender. Questions are single best answer questions (SBAQs) set in **realistic client-based scenarios**: you may be asked to identify a valid source of finance, distinguish the two main types of mortgage, recognise the documents involved in residential and commercial loans, or apply the rules on **conflict of interest** when acting for borrower and lender together (**Mortgage Express v Bowerman & Partners (A Firm) [1996] 2 All ER 836**). You should also be able to explain the **purpose and components of a Certificate of Title**. This is a closed-book assessment — ensure you can recall the core concepts and examples from memory.

Study tips

1) Memorise the **five main sources** of mortgage finance: **banks, building societies, the client's employer, a private mortgage, and finance houses**. 2) Distinguish the **two main types of mortgage**: **repayment** (capital + interest repaid over the term, mortgage discharged at the end) and **interest-only** (only interest paid; capital remains outstanding and is repaid from a separate investment plan). 3) Know the interest-rate options: **fixed, variable, capped, or tracking the Bank of England base rate**. 4) Learn the **lender's documents**: residential / simple commercial loans use a **mortgage offer**; complex commercial loans use a **commitment letter + term sheet**, followed by a **facility agreement**. 5) Remember the **conflict-of-interest** risk when one solicitor acts for both borrower and lender (**Mortgage Express v Bowerman**), and the role of the **Certificate of Title** as the final confirmation of good and marketable title to the lender.