Does a declaration of trust affect mortgage
Last Updated: 21/02/2020
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5 min read
A declaration of trust (or Deed of Trust) is used as a legally binding document to note the beneficial interest in property in England and Wales.
The deed can be drafted either during the conveyancing process when you bought the property, or at a later date during your ownership.
Some solicitors always refer to the lender (often during the purchase). However, others more rightly review the deed to see if the declaration of trust does affect the mortgage and if they actually need to get the consent of the lender.
The question of 'does a declaration of trust affect mortgage', depends on whether the deed adversely effects the lender's ability to enforce the mortgage rights under the terms of the mortgage offer.
A deed that doesn't affect the mortgage lender's security doesn't require the lender's consent.
A solicitor has an obligation to act in the best interest of their client and also the mortgage lender during the purchase of a property. You’ll find that most solicitors are comfortable reviewing the deed to confirm whether or not any of the terms of the deed effect the lender.
How to get a declaration of trust suitable for mortgage lenders?
We offer a number of Deed of Trusts for Joint Owners of Property based on the circumstances of the joint owners that don't affect the mortgage lender's security. These include:
- Deed of Trust for buying a home for anyone looking to declare their individual beneficial interest and confirm their intentions such as how to sell the property or what happens if you break-up.
It normally states a simple fixed share of the beneficial interest, for example Jane owns 40% and Mike owns 60%. This article examines this type of Deed of Trust. - Deed of Trust for Tax Purposes for a landlord sharing property income in a tax efficient way with their partner (if married, to be filed alongside a Form 17 declaration to HMRC).
If this is a property you already own as joint tenants then we can help sever the joint tenancy. - Floating Deed of Trust for joint owners looking for a floating beneficial interest that goes up and down during the life of the ownership and reflects what you put in including mortgage repayments, costs of purchase/sale and developments. (click here to find out more).
- Deed of No Beneficial Interest (also known as a Declaration of no interest in property) used for clients buying with a joint mortgage sole proprietor mortgage product where they need to declare a zero beneficial interest to avoid second home stamp duty tax, divorces and even to protect joint shared but not jointly owned property
How much does a declaration of trust cost?
Our Deed of Trust solicitors deliver various deeds of trust quickly and at low fixed costs. Costs vary depending on the complexity of the deed. Call and talk through your requirements with one of our specialists on 0333 344 3234 (local call charges apply) or click the link below to get a quote.
- Speak to a specialist about what you want to do
- Drafted by an experienced solicitor*
- Deed emailed within 24-48 hours
- Competitive Fixed prices
*It is a criminal offence for anyone other than a regulated solicitor to draft a Deed of Trust for you. Our deeds are drafted by a specialist Deed of Trust solicitor.
Does the declaration of trust prejudice the mortgage lender’s security?
The mortgage lender’s primary concern is that they will be repaid their mortgage upon sale, transfer or if they have to repossess.
If the declaration of trust affects their ability to call upon their mortgage if required then the solicitor should seek the mortgage lender's consent to the deed.
One example would be if there is someone over the age of 18 who is granted a legal right to reside in the property within the Deed of Trust.
The reason this would affect the mortgage lender's security would be that if they attempted to repossess the property, the party not on the legal title who has been granted a legal right could stop the mortgage lender from repossessing because they aren't bound by the terms of the mortgage.
This is why anyone over the age of 18 has to sign an Occupier Waiver Form (also known as a deed of postponement) if they reside in the property.
What happens if I have told my mortgage lender?
Once you have notified the mortgage lender that there is a declaration of trust then you are bound by their response. If your deed doesn't affect the mortgage lender's security then there should be no issue.
If you find that the mortgage lender does not agree with your deed then you will need to rely upon your solicitor to liaise with the mortgage lender to confirm why they do not agree to the deed and then look to redraft the deed to meet their guidance.
If you encounter an issue with your mortgage lender then we may be able to help you with redrafting your deed with our specialist solicitor. Please get in contact if you need our help using the form above.
...so does the mortgage lender need to see the declaration of trust?
Most deeds are used to assign the beneficial interest in property for tax purposes and don't affect the mortgage lender's security.
A qualified solicitor who drafts the deed should draft it so that the mortgage lender's security is not affected and as such it is not required to be sent to the lender for their consent.
Our solicitors can help draft a Deed of Trust for you and you can speak to one of our advisors today on 0333 344 3234 (local call charges apply).
Frequently Asked Questions
In some situations, such as divorce, one of the parties needs to relinquish their beneficial ownership but remain on the mortgage then the mortgage lender should agree to a deed of no interest.
The end result being that one party owns 100% of the beneficial interest of the property, however, a joint legal owner remains a party to the mortgage.
Form 17 deeds of trust are required for married couples sharing buy to let income in an unequal share. A deed is required by HMRC to declare the unequal share.
The lender will allow this, as long as the deed doesn't adversely effect their restriction and enforcement of their rights under the terms of the mortgage.
Written by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Reviewed by:
Caragh Bailey
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
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