Remortgage with Deed of Trust

[mgcoops]

Hi, I was hoping someone could help me.

I have a BTL property that was my own flat before I got married.

After a few years of marriage I became a 40% tax payer so was being stung for a lot of tax on the income from my property so I did a Deed of Trust to my wife in order to take advantage of her tax allowances.

However, I am now remortgaging the property as I need to raise some funds to put towards an extension on our primary residence (that makes it sound a lot posher than it is!) I have got someway down the line on a remortgage and the solicitor has raised this Deed of Trust to my wife and says it needs to be removed in order to proceed.

I have been told, I cannot remove the Deed of Trust and then put it back on after the remortgage has been processed as this is basically mortgage fraud, which makes sense to me.

I have asked the mortgage company (BM Solutions) if they will accept a waiver as to my wife's claim on the property. My accountant suggested this should be quite straight forward for them to agree to, however they have declined it as an option.

I am currently at the point where I feel the only solution is to reapply to BM (I don't want to apply elsewhere as I have already paid a hefty valuation fee) in the joint names of my wife and I. However, my wife would then need entering on the title deeds which then gives rise to a SDLT charge of 3 grand!

Is paying this SDLT my only option? It just doesn't seem very fair to me, and I am being turned from one person to another between my mortgage broker, the solicitor handling the remortgage, my own personal accountant and my personal solicitor.

Any help or thoughts on what I should do would be greatly appreciated! Thanks in advance.

[Claymore]

Your wife can go on the deeds with a small percentage of the property. Even 1% - the mortgage company won't have an issue with this.

My husband needed me on one of his properties and I was added with a 1% share and that equalled to £15K, so it's below the £40k threshold and therefore, no SDLT.


After mortgage is through, you can vary the percentages for the tax purposes with HMRC using a Form 17.

[jpkeates]

What does the deed of trust do?

Conventionally there are deeds of trust that are used to vary the percentages of ownership of jointly owned property for a husband and wife.
But this doesn't sound like that, this sounds like some kind of actual trust where the trust benefixially owns the property.
Is that right?

[mgcoops]

Thanks Claymore, very useful.

Ok so, currently the Deed of Trust is for 50% of the property to my wife.

Do I need to (obviously with her permission) get this deed of trust reduced to say 1%, then reapply for the mortgage in joint names?

Or, can I just add my wife to the mortgage application and then when it comes to updating the deeds give her 1% of the property rather than 50%?

Thanks.

[mgcoops]

Hi jpkeates,

Thanks for your response. The Deed of Trust was made just to make use of my wife's tax allowances.

[jpkeates]

The Deed of Trust was made just to make use of my wife's tax allowances.

The trust has to transfer some of the beneficial ownership to your wife (or into a trust).
If you've been paying tax on that basis, undoing it may be an issue.

Most(?) married couple's deeds of trust are designed to adjust the share of ownership of a jointly owned property from a presumed 50:50 split.
I suspect that your's operates differently (as there's no actual split) but that this will confuse you lender and others.

[john 1549]

this thread has caught my eye, my wife and I completed a Form 17 for 99% ownership of our mortgaged BTLs to my wife and 1% to me in order to take advantage of my wifes tax allowance. Does anyone know what happens if my wife should die? At the moment we leave everything to each other and its my understanding that the BTL mortgages will carry on, as they are in joint names.

[loanarranger]

If I read your position correctly , if your wife were to pass away , her 99% would revert directly toward yourself unless you chose to include , lenders permitting, any children on the mortgage and title deeds , whilst it may dilute your wife's share , the additional share and designed subsequent apportionment in favour of the child/ children might be more beneficial.

I would suggest that you talk with a suitably qualified accountant as it Isis advice that carries incontestable justification.