If you’re considering buying a property with another person, a deed of trust could be worth considering. In this article, we look at how a deed of trust works and how you can protect yourself if things don’t go as planned.
What is a deed of trust?
Put simply, a deed of trust is a legal document that outlines your ownership agreement. For example, you could buy with a friend and pay different amounts towards the deposit or mortgage repayments.
Your deed can outline the percentage of the property each person owns. It can also specify the division of profits when the property is sold. For example, if part of the deposit comes from an inheritance or gift, it must be repaid before any sale proceeds are split.
Why consider a deed of trust?
According to the Homeowner’s Alliance only 15% of people arrange a deed of trust before buying, yet 27% of co-buyers felt that they missed out when proceeds were unfairly split.
A deed of trust safeguards your financial interest by accurately reflecting each person’s contribution. Mortgage lenders view deeds of trust positively as they provide clarity and reassurance on mortgage repayments when two or more individuals are buying a property together.
A deed of trust also has advantages for unmarried couples. It works similarly to a prenuptial agreement, clearly stating each person’s rights and contributions. It’s also a practical solution for friends and family who want to get on the property ladder by buying together.
How can a deed of trust protect me?
A deed of trust is a legal framework that clearly defines each person’s ownership and property rights. It eliminates the need for a dispute if the worst happens, saving everyone from emotional and financial turmoil.
Drafting a deed of trust is a practical decision that protects all parties should you need to sell. You won’t have to face additional solicitor’s fees or the stress of working out how to split the sale proceeds. Inform your solicitor before you start the buying process so they can draft a deed for peace of mind.
