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  • FIRST POST
    • michelefauk
    • By michelefauk 17th Apr 17, 11:00 AM
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    michelefauk
    Second charge v declaration of trust
    • #1
    • 17th Apr 17, 11:00 AM
    Second charge v declaration of trust 17th Apr 17 at 11:00 AM
    Sorry, complicated situation and my solicitor is on holiday for another week so I'm unable to ask him.

    My partner died a year ago. The house we have lived in for 12 years was in his name, as was the mortgage (Royal Bank of Scotland) There was a restriction and Declaration of Trust added to the property when we bought it say that if we ever sold the house, I would receive the first £52000 (which was the amount I had put into the property from a previously owned one) then the remainder would be split 50/50. The house is worth about £315000 and the remaining mortgage is for £85000.
    Unfortunately my partner died suddenly and without making a will at the age of 49. We have a 12 year old child.

    My plan is to remortgage the property on my own once the property has been transferred into my name, pay off the original mortgage as the RBS require that, and set up a declaration of trust in favour of my daughter for approx £80,000 which has been calculated would be her share of her father's half of the equity. This would be held until she is 18, when she would be entitled to the money. My daughter is being represented in her interests by a Litigation Friend and a separate solicitor.

    So far so good, but my financial advisor has just told me that the new company who I have applied to for the mortgage (Nat West)will not lend on a property which has a declaration of trust. They have asked if a second could be drawn up instead, the only knowledge I have of a second charge is that it is a further loan secured on the house, obviously this is not what we need, we just need a legal clause/restriction that ensures my daughter's share of the property. Like I said, my solicitor is away on holiday and I was hoping someone could provide some advice on this process. Many thanks
Page 1
    • GDB2222
    • By GDB2222 17th Apr 17, 11:22 AM
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    GDB2222
    • #2
    • 17th Apr 17, 11:22 AM
    • #2
    • 17th Apr 17, 11:22 AM
    So sorry for your loss.

    I agree that a second charge is not the same. RBS were happy to lend originally with a declaration of trust. Any reason for moving? If I understand correctly, there would be no need to remortgage for more than you currently owe.

    Otherwise, I'd throw this back at your financial advisor to get a mortgage that does what's required.

    Finally, are you in a position to buy out your daughter? It would mean raising the mortgage by around £80,000, but you could then invest that money for her. She would get the income tax free, as things currently stand, and you could spend that on food and clothing for her, etc. It might be simpler in the long run than her having a share in the house.
    No reliance should be placed on the above! Absolutely none, do you hear?
    • michelefauk
    • By michelefauk 17th Apr 17, 11:32 AM
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    michelefauk
    • #3
    • 17th Apr 17, 11:32 AM
    • #3
    • 17th Apr 17, 11:32 AM
    Hi, thank you for your reply. Yes it's been a horrendous time, to say the least.

    The current mortgage is for £85000, I have continued paying it since my partner died so it has come down a bit. The RBS will not transfer the mortgage into my name, they are insisting is is settled in full (despite knowing and being kept up to date with the whole complicated situation, they are extremely uncooperative and horrible)

    On my current salary (I don't earn much!) I can borrow a max of £72000, the Nat West will lend me the most. The remaining shortfall I will pay off with my savings.
    Hope that makes sense.
    • Thrugelmir
    • By Thrugelmir 17th Apr 17, 12:16 PM
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    Thrugelmir
    • #4
    • 17th Apr 17, 12:16 PM
    • #4
    • 17th Apr 17, 12:16 PM
    The RBS will not transfer the mortgage into my name, they are insisting is is settled in full (despite knowing and being kept up to date with the whole complicated situation, they are extremely uncooperative and horrible)
    Originally posted by michelefauk
    Don't take it personally. Mortgages aren't transferred. They are applied for. Sounds as if you don't meet their lending criteria. Have you actually applied for a mortgage with them if so how much for.

    Who is entitled to the other share of the remaining equity.
    “ “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” Sir John Marks Templeton
    • michelefauk
    • By michelefauk 17th Apr 17, 12:41 PM
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    michelefauk
    • #5
    • 17th Apr 17, 12:41 PM
    • #5
    • 17th Apr 17, 12:41 PM
    No I haven't applied for a mortgage with RBS, my Financial Adviser said they wouldn't lend me enough to bother applying. Nat West were the best for rate and amount they will lend me.

    So the house is worth £315000, the mortgage will be for about £72000, £80000 will be held for my daughter (with interest calculated for the next 6 years) and the rest is my share.
    • Thrugelmir
    • By Thrugelmir 17th Apr 17, 7:17 PM
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    Thrugelmir
    • #6
    • 17th Apr 17, 7:17 PM
    • #6
    • 17th Apr 17, 7:17 PM
    No I haven't applied for a mortgage with RBS, my Financial Adviser said they wouldn't lend me enough to bother applying. Nat West were the best for rate and amount they will lend me.

    So the house is worth £315000, the mortgage will be for about £72000, £80000 will be held for my daughter (with interest calculated for the next 6 years) and the rest is my share.
    Originally posted by michelefauk
    RBS and NatWest are the same banking group. May well be similar policies.
    “ “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” Sir John Marks Templeton
    • GDB2222
    • By GDB2222 17th Apr 17, 8:53 PM
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    GDB2222
    • #7
    • 17th Apr 17, 8:53 PM
    • #7
    • 17th Apr 17, 8:53 PM
    No I haven't applied for a mortgage with RBS, my Financial Adviser said they wouldn't lend me enough to bother applying. Nat West were the best for rate and amount they will lend me.

    So the house is worth £315000, the mortgage will be for about £72000, £80000 will be held for my daughter (with interest calculated for the next 6 years) and the rest is my share.
    Originally posted by michelefauk
    I've heard it suggested that children in this situation get enough benefit just from living in their share of the house, without interest added. But then she would own 80/315ths of the house.

    What's the plan for buying her out in 6 years time?
    No reliance should be placed on the above! Absolutely none, do you hear?
    • michelefauk
    • By michelefauk 17th Apr 17, 8:58 PM
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    michelefauk
    • #8
    • 17th Apr 17, 8:58 PM
    • #8
    • 17th Apr 17, 8:58 PM
    I don't have a plan, I would imagine when my daughter is 18 and hopefully going off to uni, I will probably sell up and downsize as it's a 4 bed house which will be too big for just me.
    • GDB2222
    • By GDB2222 17th Apr 17, 9:03 PM
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    GDB2222
    • #9
    • 17th Apr 17, 9:03 PM
    • #9
    • 17th Apr 17, 9:03 PM
    I don't have a plan, I would imagine when my daughter is 18 and hopefully going off to uni, I will probably sell up and downsize as it's a 4 bed house which will be too big for just me.
    Originally posted by michelefauk
    Lots of good reasons for not doing that now, so soon after the bereavement. I hope you get a mortgage that suits, so you are not forced into downsizing now. Maybe you need a second opinion. (About the mortgage.)
    No reliance should be placed on the above! Absolutely none, do you hear?
    • ThePants999
    • By ThePants999 18th Apr 17, 12:55 PM
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    ThePants999
    the only knowledge I have of a second charge is that it is a further loan secured on the house, obviously this is not what we need
    Originally posted by michelefauk
    Well, it sort of is. One way to look at the situation is that your daughter is loaning you £80,000.

    Here's a question worth asking yourself. Imagine that by the time you sold the house, it had doubled in value. Would you think that a fair payment to your daughter is "£80,000 plus interest", or "£160,000"? Would she agree?

    A declaration of trust is the best way of representing "she owns a certain proportion of the house", i.e. the latter idea. A charge is the best way of representing "she's owed money, secured on the house", i.e. the former idea. Neither is obviously right or wrong - you need to decide whether she's keeping a part share of the house until it's sold, or whether you're buying out her part share with a deferred payment.
    • unforeseen
    • By unforeseen 18th Apr 17, 1:08 PM
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    unforeseen
    Have i missed something?

    You weren't married to your partner and he died intestate. The estate i.e. the house, should then be going to the daughter as next in line.

    Would the declaration of trust be null and void as one party is now deceased?

    You may have a beneficial interest but no right to put the house in your name and raise money against it.
    • michelefauk
    • By michelefauk 18th Apr 17, 3:37 PM
    • 433 Posts
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    michelefauk
    Thank you for the replies.
    As far as my solicitor has advised me, the declaration of trust is valid. As my daughter is 12, she can't inherit anything until she is 18. The only way we can stay in our home is for me to take on a mortgage on it, to do so the house has to be in my name. I have no other means of paying off the existing mortgage which is being insisted on, other than to sell the house which we don't want, my daughter has had enough trauma in dealing with the sudden loss of her father and is adamant she does not want to move.
    • GDB2222
    • By GDB2222 18th Apr 17, 4:03 PM
    • 13,662 Posts
    • 72,523 Thanks
    GDB2222
    Have i missed something?

    You weren't married to your partner and he died intestate. The estate i.e. the house, should then be going to the daughter as next in line.

    Would the declaration of trust be null and void as one party is now deceased?

    You may have a beneficial interest but no right to put the house in your name and raise money against it.
    Originally posted by unforeseen
    The daughter owns 80/315ths of the house. She has inherited that from her father.

    The mother wants to document that with a declaration of trust.

    "My daughter is being represented in her interests by a Litigation Friend and a separate solicitor. " So, the daughter's interests are being looked after.

    The mother is stymied because she needs to raise a new mortgage to pay off the old mortgage, which was in the dad's name, but the chosen lender doesn't like the declaration of trust.
    No reliance should be placed on the above! Absolutely none, do you hear?
    • getmore4less
    • By getmore4less 18th Apr 17, 4:44 PM
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    getmore4less
    The equity in the house(after mortgage) house sits in the estate trust(as legal owner) with two beneficial owners.

    The issue is getting to a point where a lender will accept the legal/beneficial ownership setup where one of the beneficiaries(a minor) has their share in a trust(they cant be a legal owner).
    • michelefauk
    • By michelefauk 21st Apr 17, 8:22 AM
    • 433 Posts
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    michelefauk
    Thank you everyone who has commented, I guess there is no easy answer and I'll have to wait until my solicitor is back next week to see what he suggests.
    Thank you
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