Second Charge Loan with Declaration of Trust

ByzantineByron

Hi all, hoping someone can help.

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!

Exodi

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.

Thrugelmir

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. 

ByzantineByron

Hi, it's a DOT we do not have a pre-nup.