When buying a house, especially at today’s prices, it can be concerning to use a significant amount of your own money as a deposit. If you are contributing a lot more than the other person/people you are buying a house with, this can be even more disconcerting. This is where a declaration of trust can help to minimise your anxieties.
What is a declaration of trust?
A declaration of trust is a document that legally binds the parties involved in financial agreements. This includes the shares of the property each party owns, how much each party contributes to the purchase, and how much each party receives in the event of a potential sale of the property in the future.
This arrangement is particularly helpful if a third party is contributing to the cost, such as parents helping out with the deposit. By outlining this contribution in a legal document, everyone is entitled to their rightful share of the property. This will be taken into consideration when distributing the property shares. You can read more about the two types of property ownership here:
If you tried selling the property without a declaration of trust in place, you would be likely to incur additional solicitors’ costs for dividing up the property fairly; fortunately, you will find plenty of declaration of trust specialists to advise you on the best arrangements.
How does this affect my deposit?
As the declaration of trust cements the ownership shares in a legal agreement, all contributors agree that their contributions are worth specified percentages and that their investments will be properly reimbursed.
This means that even when relationships sour, or you decide to sell the property for whatever reason, your investment won’t have been for nothing.
This agreement also covers mortgage repayments, ensuring each party that will be paying off the mortgage knows exactly how much they will contribute. Again, this is particularly helpful when other parties are contributing to the costs, such as parents who help with the initial deposit but do not contribute to the mortgage payments.
