Declaration of trust

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    Declaration of trust

    Hello Property Experts,
    i am about to buy my first property in London/UK along with my wife as joint mortgage holder. Property i wanted to buy belong to my relatives which I am renting at thr moment. They asked me to buy outright but bit out of my budget. So they offer me help for deposit and reminder will be mortgage I will get. For helping me with deposit which is 25% of property value - they suggested to have trust deed with the knowledge of lender so they are safe and things are clear for future selling or buying outright If i manage to pay them the amount. My queries are 1- what kind of trust deed will it be? Any draft available? 2- how to find lenders who accept declaration of trust? 3- what are the things to take care for while making such deed so both parties after lender's charge are safe from each other if in future we have some issues ? They will be second charge on the property and their current lender is fine to have teust deed but rates are higher for me than other lenders? Can someone help me understanding the whole mortgage procedure with declaration of trust in lay man terms being first time buyer? Any link with the info will be fine even.
    I need advise on good lender as well if someone can suggest. I have good credit rating and my wife as well being civil services employee. We both are full time employed with reputable employers and initial check suggested we will get 70-75% mortgage of the property price being london zone 3 property. And remaining part will be added by my relatives as socond charge. Thanks Aj

    #2
    It sounds like a standard tenants in common arrangement, which should be bread and butter for any conveyancer.

    Both parties will need to agree before there is any sale.

    The lender will insist on both parties being liable for the full mortgage.

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      #3
      Hi leaseholder64,
      Unfortunately, sellers/relatives are not intended to keep any mortgage liability once they 'help' us in getting deposit with trust deed. So one of mortgage advisor told me to have one standard letter of agreement from seller that they will gift deposit money interest free to me before underwriter process the mortgage. They solicitors will have trust deed considering sellers as secondary charge on property after lender/bank. Everything is new to me being FTB. So need layman term explanations from mortgage advisor or lender or experts here to understand before following peocedures. And not stuck somewhere in middle after spending money on survey or mortgage advisor fees.
      thanks
      Aj

      Comment


        #4
        What they are doing is making a loan and securing it on the property.

        Also ask about tax implications, for both parties.

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          #5
          Just a cautionary note, it is not automatic for lenders to give consent for the registration of a second charge; normal circumstances on a regulated mortgage are more flexible for such permissions much less so when it comes to Buy to Let mortgages.
          Before doing anything either appoint a broker to investigate if whatyou are proposing will be allowed or make an appointment with one or more lenders with High Street presence and discuss the matter in detail, unfortunately a solicitor at this stage are of no benefit.

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            #6
            Does any UK mortgage lender agree to offer 75% mortgage loan when the 25% deposit is also borrowed ?

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              #7
              It is the exception rather than the rule, normally deposits either come from personal savings , equity from a sale or a Gifted Deposit. If a family member were providing a loan with stated terms of repayment , the lender would have to be fully satisfied that the borrower had the income to meet the total monthly payments.

              I get numerous requests from clients to raise monies by second charge rather than sacrifice a very competitive reversionary rate, this is certainly the case for BtL loans, sadly where a lender securitises it’s loans have restrictions on the funding terms it has with banks/ financial institutions and such requests are declined. With main stream performing residential loans , the conventional banks or building societies are more inclined to grant permissions given that the FCA require a borrower on a regulated loan to be treated fairly and being forced to Remortgage just in order to raise additional monies could be considered unfair when the cost of borrowing by second charge combined with the existing first charge could be more economic to having a new mortgage , so any broker in such instances needs to review the comparative costs.

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