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What happens to my home if I start a Trust Deed?

Posted 05 March 2019

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When you start a Trust Deed, if you’re a homeowner you may be asked to release the value of any equity from your property. What does this mean, and how does it work? Read on for everything you need to know.

What is a Trust Deed?

A Trust Deed is a Scottish debt solution. It allows you to repay your lenders over a set period, usually 4 years. All of your assets are conveyed to your Trustee, including your home. Once you have made all payments required under the terms of your Trust Deed, any outstanding debts will be written off and your Trustee will be discharged.

What does equity mean?

‘Equity’ is simply the value of your property minus the outstanding balance of your mortgage and/or secured loan.

Can I protect my home?

A Trust Deed can help protect your home. This is unlike Sequestration, where homeowners may be asked to sell their property to repay their lenders. With a Trust Deed you will agree with your Trustee at the outset how you wish to deal with your property.

Why does my home need to be valued?

Your Trust Deed provider is legally required to arrange for a valuation of your property, and to agree on how to deal with any equity, before your Trust Deed is signed.

What happens if I have little or no equity?

If there is no equity, or very little equity, in your property, then you will have to pay a fee of £550. This can be paid by a third party. If that’s not possible, you can simply extend the term of your Trust Deed to include this fee. Once this fee is paid, the Trustee will have no further interest in your property.

What happens if I do have equity?

An agreement about your equity will be made at the start of your Trust Deed. Towards the end of the term of your Trust Deed you will be expected to try to remortgage, to release this equity and pay it into your Trust Deed. You’re required as a condition of your Trust Deed to make two attempts to remortgage, up to 85% of the property value.

If you own a property with a partner, you will only need to arrange to pay your share of the equity into the Trust Deed.

What if I can’t remortgage?

If you can demonstrate that you’ve tried to remortgage but have not been successful, the term of the Trust Deed will be extended to enable you to pay in some or all of the equity from your property. The length of the extension may vary depending on the amount of equity you have and your disposable income, but is usually between one and two years.

What if I decide to sell my property during my Trust Deed?

If your property is sold, the full amount of equity must be paid into your Trust Deed.

Is a Trust Deed for me?

Click here to find out more about Trust Deeds and other debt solutions available in Scotland.

 

by Christine Walsh

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