How will a Trust Deed affect my property?
Written by Chelsea Potter on 22 August 2016
One of the main concerns people express when enquiring about trust deeds is whether they will lose their home. As properties are considered an asset they must be declared in a Trust Deed and creditors must be made aware of any available equity. Any available equity must be ‘released’ to pay towards the creditors but this does not necessarily mean losing your home.
When you talk to an adviser your property will be discussed upfront, there are never any hidden clauses when it comes to people’s homes. A formal property valuation will be completed and your Trustee will ask for a copy of your secured loans agreements and up to date balances, from this they will be able to establish the equity level in your property.
If you have negative equity you will not have to release any equity as there is essentially nothing to release. However if there is equity available your money adviser will come to an agreement with you about how you plan to release your equity; and this can be done in a number of ways:
For people who have not struggled with their finances previous to entering a Trust Deed a re-mortgage may be a solution to releasing equity. To re-mortgage you must have a viable surplus in order to afford the new higher repayments to your new mortgage. However, if you were in an alternative debt solution prior to entering the Trust Deed you may find that re-mortgage is not an option due to poor credit history.
2. Third party buy-out
Some clients have the option to turn to a relative or friend who would be able to ‘buy out’ their share of the equity within their property. That money would be paid to the Trust Deed and distributed among their creditors.
3. Mortgage to rent scheme
This scheme is available to client’s whose homes are at risk of being repossessed due to financial difficulty. If a successful application is made; the client’s home will be bought by their local council or a housing association, and they will continue to live there as a tenant. Any available equity is then paid in towards the Trust Deed.
4. Selling the property
Another option is to look at selling your home and pay any available equity into the Trust Deed this way.
5. Extending the term of the Trust Deed
If none of the options above are viable you may be able to extend the term of your Trust Deed. The extension is usually for 12 months and allows the client to make a monthly payment of their available surplus to the Trust Deed as a contribution towards their equity amount.
You may wonder how this option is accepted by creditors due to only paying a portion of their equity, but creditors understand that the above options aren’t a solution for everyone and are willing to accept the extension as a resolution. Your Trustee will ask you to sign an agreement regarding the extension payments and this will be sent to your creditors as confirmation.
If you extended your trust deed but then started to miss payments and break your agreement, the Trustee does have the power to then sell the property and retrieve any available equity this way.
It is important to remember that any decision surrounding your property is chosen by you before you sign anything. Your Trustee will discuss all options available to you and your preferred option will then be written into your Trust Deed proposal.
The choice is completely yours so how your home is handled during a trust deed will depend on you. This will also be decided before you sign up for a trust deed so if your home is still a cause for concern we can help you look at alternative debt solutions.
If you would like to discuss trust deeds or get further advice about handling your debts, you can call us on 0800 280 2816.
Filed under Debt advice