Can a Trust Deed help if mortgage rates go up?
With mortgage interest rates on the increase, we consider whether starting an Trust Deed could help if you are struggling with your monthly mortgage payments.
Over the past couple of months a number of mortgage companies including Halifax, Co-Op and Bank of Ireland have confirmed that they will be increasing their mortgage rates for customers on the standard variable rate.
This means that thousands of mortgage customers will face an increase in their monthly mortgage payment. If the standard variable rate rises by just 1% this will add £125 a month to the average £150,000 mortgage.
If you are already struggling to make ends meet, particularly if you have other debts to pay, such an increase could have a serious impact on your household finances. People in this position could therefore benefit from a debt management solution such as a Trust Deed.
Pay your Mortgage by reducing your unsecured debt payments to free up cash
If you find you are starting to struggle because your mortgage payments are increasing, one way of managing the situation is to pay less towards your unsecured debt payments.
However if you are already making just the minimum payments, the only way to reduce these still further is with a debt management solution.
The benefit of a debt management solution is that they enable you to reduce the payments you make towards your unsecured debts thus freeing up the cash you need to pay your rising mortgage payments
There are a number of different debt management solutions available in Scotland including Trust Deeds and Debt Arrangement Schemes. However as a home owner the Trust Deed option might well be the better option for as well as giving legal protection for your property your debts will also be settled in a far faster time scale than if you use a DAS.
Do you want help to start a Trust Deed? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts
A Trust Deed stops creditors securing debt against your property
Once in place a Trust Deed prevents any of the creditors included in the agreement taking further legal action against you to enforce their debt.
As such the Trust Deed solution can be ideal for homeowners as it prevents any creditors included in the agreement from being able to apply for a charging order against your home.
Starting a Trust Deed may prevent your home from repossession
If you are already struggling with your debt payments, the last thing you will be able to cope with is an increase in mortgage rates.
If mortgage interest rates go up, this will increase the amount you have to pay on your mortgage. If you cannot afford to pay this increase, you may consider missing a mortgage payment so you can at least keep up the payments on your credit cards and other unsecured debts.
However this is the worst thing you could do. If they are not paid, your unsecured creditors cannot repossess your property. However the mortgage company can.
By starting a Trust Deed you will protect your property from repossession. The agreement frees up the cash you need to pay your mortgage by reducing the amount you pay your unsecured creditors in a controlled and managed way.
Understand the downsides to the Trust Deed
A Trust Deed can be a very good solution for homeowners who have unsecured debts and are struggling to pay their mortgage. But it is not something you should start unless you are fully aware of the implications.
One area that you need to fully understand is that if you have equity in your property you will required to release this during the course of your Trust Deed to help repay your unsecured debt. If this is something you want to avoid, then a Debt Arrangement Scheme may be a better option for you.
Nevertheless, it is true to say that in the vast majority of cases even given that you will need to release home equity, the Trust Deed solution will allow you to write off unsecured debt that you cannot afford to repay and protect your home from charging orders and the possibility of repossession due to non payment of the mortgage.
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