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Thomas
Thomas, Solicitor
Category: Family Law
Satisfied Customers: 7620
Experience:  UK solicitor
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When re-mortgaging and adding a partner to the mortgage is

Customer Question

When re-mortgaging and adding a partner to the mortgage is it possible to legally agree (draw up a legally binding contract) for the split of ownership of the property.
On taking out the mortgage I put in £40k deposit (£30k of which was a gift from my father). I am now considering adding a partner to the mortgage but want to protect my father's money and also my own ownership of the property. My partner intends to contribute £20k and we would be happy with an ownership split of 2/3 to 1/3 in my favour based on how much deposit we have put down each.
Submitted: 2 years ago.
Category: Family Law
Expert:  Thomas replied 2 years ago.
Hi
Thank you for your question and patience, I’m Tom and I’ll try to help you.
Yes,. It is and it’s called a declaration of trust.
To do this you would need to hold your property as “tenants in common” and not as “joint tenant”. This means that your respective interests pass according to your will (ie. not automatically passing to the surviving owner) and that you can own unequal shares in the property.
You may then make a declaration of trust, which is a deed sworn by you both in which you specify how the proceeds of sale of the property (ie. when it is eventually sold) are to be divided. This could take account of your large deposit by either specifying that you should receive this amount first and dividing the remaining equity equally (or as a percentage proporation) or it could simply state that you receive x% and you partner receives y%.
In order for the declaration to give you the best security you and your partner would both receive separate independent legal advice on the declaration before you executed it.
If you wish to do this then you should advise the solicitor dealing with the transfer/remortgage and they will take the next steps for you.
It should cost around £150+ VAT to have this done.
My goal is to provide you with a good service. If you feel you have received anything less, please reply back as I am happy to address follow-up issues specifically relating to your question.
Kind regards,
Tom
Thomas and other Family Law Specialists are ready to help you
Customer: replied 2 years ago.

Hi,

Thank you for your answer. In follow up, what impact would the declaration of trust have on each individuals' liability. Does the % ownership impact % liability each person has of the mortgage or does the mortgage operate independently from the ownership of the property?

Also, I have an additional question. On buying the property my father gifted me £30k towards the £40k deposit. For the purpose of the mortgage this is a gift and there is no repayment or terms to this nor does he have a claim over the property. However, my father is keen to protect the money he has given me and has suggested a "first creditor agreement". Can you explain how this would protect the money (presumably without interfering with ownership or claims over the property) and whether this is an effective way to protect the money. Also, if there are other options to protect the money please can you explain these.

Thanks

Stuart

Expert:  Thomas replied 2 years ago.
Hi,
The mortgage liability is unaffected because it is joint and several liability, which means that you will both be liable for the whole mortgage despite the declaration of trust declaring your percentage ownerships.
Your father would probably be best protected in having his contribution stated as being repaid before the division of ownership declared in the declaration of trust.
Tom
Customer: replied 2 years ago.

Hi,

If we were to have a declaration of trust which states that ownership was not 50:50, for example 1/3 and 2/3. Then payments of the mortgage are shared equally for a period of time - does this impact the ownership claim given that repayments and therefore capital is repaid at a different proportion than the declaration of trust or is the declaration of trust binding regardless of payments made?

Please can you explain how stating my father's contribution as being repaid would work? Would I need to actually repay the amount?

Thanks

Expert:  Thomas replied 2 years ago.
HI,
Equal payment of mortgages would not affect the stated proportions provided that equal payment was stipulated in the declaration and you both have legal advice on it before completing it.
The declaration as to your father's share would stated that his gift is repaid first from the equity in the property and then any balance left over is divided in the percentage shares that you and your partner specify .
Tom