Debt and your home


Debt and your home

Will a trust deed or a Debt Arrangement Scheme protect my home?

Unlike solutions like sequestration, trust deeds and Debt Arrangement Schemes offer the great advantage that, as long as you don’t fall behind on your mortgage, you’ll be able to keep your home.

However, you can be asked to release equity from your property to help pay back your debts. This depends on the value of your property and does mean you may be paying a mortgage for longer.

I rent my home, will it be affected?

If you’re a renter, most debt solutions will not affect your tenancy, and you don’t have to let your landlord know.

What’s more, although most debt solutions are noted on your credit file, they shouldn’t affect your ability to rent a new property. However, you may be asked to pay a higher deposit, have a guarantor or pay your rent in cash each month as a form of security.

If you’re in arrears with your rent, you may not be able to include this in some debt solutions, particularly if it is your current tenancy. Generally, you’ll be given an allowance with your budget to pay your rent along with the arrears, reducing your chances of eviction.

The only exception to this is if you’re going into sequestration, as many rental agreements contain a clause that renders this a breach.

I’m in arrears with my mortgage. What can I do?

Falling behind on your mortgage payments can lead to serious consequences, but most mortgage providers have to explore all other options before looking at repossession, especially if it is going to work out at a loss for them.

All providers are regulated by the Financial Conduct Authority (FCA), whose job is to make sure consumers are treated equally and fairly. As such, if you feel you are being treated unfairly, they have the power to step in.

It’s always best to keep your mortgage provider in the loop with your situation. If they know what’s going on, they’ll be more likely to work with you and help you pay back your arrears in a way that suits you.

What can I do if I’m not in a debt solution?

If you’re not in a debt solution, there is the option to use any available equity in your home to help clear your debts.

This is normally done by taking out a second mortgage, either with your current provider or switching to a different one, also known as an equity release.

Equity can be released to you in one larger payment, or several smaller ones. It often comes with a lower interest rate than your other debts, giving you the opportunity to save more money in the long term.

However, the loan is secured against your property, so it still has the potential for you to lose your home if you struggle to make the recalculated mortgage payments. If you are thinking of going down this route, it’s important to make sure you have all the relevant information in order to make a reasonable decision.

My home is worth less than my mortgage, what does this mean?

This is referred to as being in negative equity, and it’s a common occurrence in today’s ever-changing property market.

If selling your home is not in your immediate plans, negative equity might not necessarily be in your list of worries. However, it can leave you with a shortfall when you do decide to sell.

Our best advice is to speak to estate agents and get multiple valuations to help you to know how much of a shortfall you’ll have.

Your home may not be in negative equity forever. It is possible for the market to change and the value of your home to increase. There’s also the option to try and pay more towards your mortgage beforehand (if you can afford to) to reduce the shortfall amount if you then decide to sell.

I’ve received a notice of repossession, what should I do?

If you have received a notice of repossession, it’s very important to follow any instructions it gives you. Call your provider and discuss your situation; repossession is normally their last resort to recover the money you owe, so they may still be willing to work with you.

If the notice includes a court date, it’s vital that you attend. Understandably, this may cause you stress, but attending the court hearing can give you the chance to offer a payment plan to your provider and avoid losing your home.

If you are struggling financially and are worried about your home, contact us today. Our friendly advisors are always on hand to offer free and confidential advice to help you find the best way to deal with your debts.

You could write off up to 75% of unsecured debt with our debt assistant.

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