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What is a joint mortgage unequal deposit?
A joint mortgage unequal deposit is a deposit put down by two people together when taking a joint mortgage.
Sometimes one applicant may be in a position down more of a deposit than the other applicant.
This results in an unequal deposit which can sometimes cause an uncomfortable situation when it comes to the applicant’s equity.
In this scenario, applicants will usually come up with some sort of an arrangement so things can remain fair going forward.
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Can I protect my deposit on a joint mortgage with an unequal deposit?
If you are putting down a joint mortgage unequal deposit, you may well wish to protect this deposit legally in case you were needing to sell the property and divide up the equity.
The document that would generally be created to do this is called a deed of trust. A deed of trust is created by a solicitor as a written agreement about how the equity is divided up.
The basis of the agreement on the deed of trust will vary with each scenario.
The reason is different people will have different ideas of what seems the fairest when there is a joint mortgage unequal deposit.
Some buyers may wish to get a larger share of the property profits when it is sold in the future to reflect that they put down a larger deposit.
Another buyer may wish to just get the amount that they put down as the deposit plus their 50% share of the property profit when it sells.
A solicitor may be able to guide you on the best way to do it but it will be important for you as the purchasers to be happy with the financial agreement that you put in place, so nobody feels that things are unfair.
If we have a joint mortgage unequal deposit, do we pay different amounts towards the mortgage each month?
No, with a joint mortgage unequal deposit, you will both be responsible for making the full payment of the mortgage rather than a share each based on your agreement.
When you take a joint mortgage with a lender, the lender insists that all borrowers have the same responsibility as one other to make sure that the mortgage is successfully paid.
For instance, if you owe £100,000 and your mortgage payment is £1,000 per month, this payment is not split based on your percentage of the deposit.
If one party put down 70% of the deposit on the property and expects to walk away with more equity in the event of a sale, the lender will not see them as responsible for more of the mortgage payment than the other borrower.
Even if a solicitor was to draw up an agreement that suggested one party should pay more, if the mortgage were not successfully paid, it would have implications on all borrowers.
An experienced mortgage adviser will be able to give you guidance on your responsibility as a mortgage holder.
Do you get joint mortgage unequal deposits on buy to let properties?
Absolutely, if two people were buying a buy to let property together, there is a chance that the deposit will be unequal.
Buy to let mortgage lenders treat this in a similar way to residential mortgage lenders and insist that all parties are responsible for making sure that the mortgage is paid.
Solicitors can still draw up a deed of trust for unequal deposits on a buy to let property.
How much would it cost to draw up a deed of trust?
The amount that it costs to draw up a deed of trust with a solicitor will vary based on the firm. A common amount is approximately £300 plus VAT.
This would usually involve the solicitors giving you legal advice and preparation of the agreement itself.
To find out how much you would need to pay to get a deed of trust drawn up, speak to local solicitors and request some quotes.
If you would like to read up on a Transfer Of Equity Mortgage, you can find valuable information here.
Will all lenders allow there to be a deed of trust on the property?
Most lenders will allow there to be a deed of trust in place on the property but some may not like this taking place.
For the lenders that do, they may have certain rules to abide by with regards to the financial agreement in place.
If you plan to draw up a deed of trust to protect one’s equity within the property, make sure you tell your mortgage adviser.
Your mortgage adviser will then be able to check with lenders to make sure that they can lend with a deed of trust drawn up.
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Where is the deed of trust kept?
When you draw up a deed of trust, the document is prepared by the solicitors to be signed and stored safely by yourselves.
However, many solicitors recommend that a deed of trust is registered with the land Registry.
The reason this is done is so that in the event of a sale, the selling solicitors need to distribute the funds according to the legal agreement in place.
This is safer than just storing the document as if it was lost or destroyed for any reason, the agreement would still be registered with the land registry.
There can be implications of this when you come to remortgage. If a new lender does not allow there to be a deed of trust in place to protect a joint mortgage unequal deposit, they may insist that agreement is removed from the property and Land Registry.
Your solicitor would be able to give you advice about what is best to do when arranging a deed of trust.
Conclusion
With a joint mortgage unequal deposit, you do have options available to you.
Many people choose to protect the unequal deposit by way of a legal agreement.
The terms of the agreement will vary based on the individual situation. You should always take legal advice when you are thinking about protecting equity within a home.
Finding the right mortgage is also important with a joint mortgage unequal deposit.
It’s always best to find a mortgage adviser with the correct experience.
If you would like to talk to a mortgage adviser about joint mortgage unequal deposits, please complete the contact form so I NEED ADVICE can match you with a suitable mortgage adviser.
They are experienced, which can boost your chances of being approved.
