It is a legal document to protect everyone's financial interests when you're buying, owning and selling together.
What is a deed of trust?
A deed of trust is something you’ll come across when you’re buying a property with someone else, or with the support of someone else.
It’s a legal document, sometimes referred to as a declaration of trust, which records the financial arrangements between everyone who has a financial interest in the property.
Why is it important to consider the legal side of things?
Buying a home is likely the biggest financial commitment of your life.
If you’re buying with a partner, family or friend, you may not be contributing identical amounts to your deposit. You may not be contributing the same amount to your monthly mortgage payments either.
It can be a good idea to put down in a legal document who gets what when the house is sold or when someone wants to sell their share of the home. Setting out how much each person has put in and what should happen if anyone wants to sell their share of the property can help avoid disagreements and uncertainty in the future.
Everyone's initial ownership in the property is marked at the outset. When it comes time to sell, the deed of trust determines how the sale proceeds are distributed.
What makes the Gen H Agreement different?
If you like the idea of having individual shares in the property, the home agreement offers a unique feature.
Your individual shares in the property can reflect your individual contributions towards the deposit and mortgage repayments. This ownership structure doesn't have to be fixed, but can dynamically change over time.
Your financial situation may change, who pays what towards the mortgage may change, and you can have your ownership change in line with this. If you contribute more to the payments, your share will grow. If you contribute less, your share will grow more slowly.
If you're buying as a group, the Gen H home agreement allows you to maintain your individual ownership shares.
How do you track who pays what and, therefore, who owns what?
To track who has paid what, we require that everyone sets up a Direct Debit so that they're paying from their personal bank account rather than a joint account.
Making individual payments makes it clear who has contributed what, avoiding potential disputes in the future or the need for complicated spreadsheets. We record how much money each person has paid toward the mortgage and use this to track your individual equity share.
How much will this cost?
As legal owners, before you sign your home agreement, we strongly recommend you get legal advice from your conveyancer, or another lawyer, so you fully understand what you’re agreeing to. In the near future, this legal advice for legal owners will become a requirement.
If you’re working with Gen H Legal on a purchase, they’ll provide this legal advice at no extra charge. If you’re using another conveyancer, they may charge an additional fee to advise you.
Income boosters will need to pay to get independent legal advice (ILA) from a lawyer. This is to ensure they get unbiased advice before entering this agreement and so they fully understand what they are agreeing to before signing up. The cost of ILA can vary.
What does this mean for Income Boosters?
If you have an income booster on your mortgage they are able to contribute to the mortgage payments now or in the future.
If they do make contributions and would like to build equity in the property, a home agreement should be signed.
Can I repay my Income Booster?
If your income booster makes payments towards your mortgage, you can purchase their equity share in the property. They have to agree to this course of action.
There can be tax implications to purchasing shares from your booster or anyone else on the mortgage, so we recommend you get expert tax advice before you do. You may also need to instruct a conveyancer in order to purchase another legal owner or income booster’s share.
If the booster wishes, they can also gift some or all of their equity share to the owners of the property.
Speak with a member of the Gen H team to learn more. Remember that your solicitor is there to advise you on your most suitable ownership structure.
To read more about the different ways that you can own your home, click here.