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Second Charge Loan with Declaration of Trust
My wife and I are in the middle of applying for a secured loan on our property to consolidate debt. It's very much last resort for us, but I have a poor credit score (from mistakes that I made years ago that I am struggling to work my way out of) and as a result we're applying for a loan to reduce our debt outgoings from around £1100 a month to £350 a month. Our plan is to get on good footing and then start making regular overpayments, as we've stipulated to the broker (Fluent Money) that we need a broker that will allow regular overpayments without penalty.
However Fluent need me to obtain a solictor signature on a form that confirms that the Second Charge Loan does not interfere with a declaration of trust.
The DoT is from when we bought the property, as my wife had the savings for a deposit (from a savings account her parents secretly set aside for her), but I was the one with a wage to make the monthly payments. So we signed the DoT to legally protect that deposit (£50k) in the event that we divorce and have to sell. Her parents were adamant it was that or a pre-nup and we all thought the DoT was a fair compromise.
What I was wondering is how the second charge interacts with the DoT? In the event that the worst happens and we have to sell the house, I assume it's First Charge (Mortgage) > DoT > Second Charge? Or is it that the Second Charge affects the DoT (i.e. could she in theory get less money than the £50k?)
For reference, our house was bought for £170k, we have £121k outstanding on the mortgage and the current property value is for between £205k-£220k (depending on who you ask). The Second Charge Loan is for £46k.
Thanks in advance!
Comments
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I believe both charges would need to be discharged and then the solicitor would ask how the remaining monies is to be split. I don't think DoT's are binding in the way you intimate.
I believe the purpose of a DoT is if you were unable to agree the split - you are able to refer to it (in court if necessary) to show what had previously been agreed.
Conversely, you can sell a house with a DoT in place between the two parties with completely different figures to those in the DoT if both parties are in agreement.Know what you don't2 -
I'm with @Exodi
Is it a DOT or a pre nup? Very different documents.In terms of legal standing. Now that you are married.0 -
Hi, it's a DOT we do not have a pre-nup.0
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I’m not a solicitor, but normally the order would be mortgage first, then the second charge loan, with any remaining equity split under the Declaration of Trust. So yes, the second charge could potentially reduce the amount protected by the DoT if the property had to be sold.
That’s likely why the lender wants a solicitor to confirm there’s no conflict. Definitely worth getting independent legal advice before signing anything.
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This is a 4 1/2 year old thread and OP hasn't been on the forum at all since Mar 13, 2025
Sam Vimes' Boots Theory of Socioeconomic Unfairness:
People are rich because they spend less money. A poor man buys $10 boots that last a season or two before he's walking in wet shoes and has to buy another pair. A rich man buys $50 boots that are made better and give him 10 years of dry feet. The poor man has spent $100 over those 10 years and still has wet feet.
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Four year old thread ManyWays.
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