Does a declaration of trust affect mortgage
21/02/2020
4,719
5 min read
A declaration of trust (a 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. The question of whether your mortgage lender needs to be informed of the deed is one where some solicitors always refer to the lender (often during the purchase), however some 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. 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. There are deeds where a declaration of trust is required such as for Form 17 purposes or to prove a Declaration of No Beneficial Interest.
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
Our deed of trust solicitors drafted deed of trust delivered quickly and at low fixed cost. You can call and talk through your intentions 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).
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