Can I Get A Mortgage With A Trust Deed? - Carrington Dean stars-five-icons

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31.10.2018

Can I Get A Mortgage With A Trust Deed?

Many people who are struggling with debt worry that they won’t be able to borrow money in the future. So it’s a common concern that when entering into a Trust Deed you may wonder about the impact this will have on your ability to obtain a mortgage either whilst in your arrangement or after.

A Trust Deed usually lasts 4 years, during which time you will make affordable monthly payments. A Trust Deed stays on your credit file for 6 years after the day it becomes protected, therefore mortgage lenders may be wary of lending to you.

Getting a mortgage after a Trust Deed

It is possible to get accepted for a mortgage after your Trust Deed ends, however, your options may be limited and you will most likely face high-interest rates.

Once you have been discharged from your Trust Deed you will need to rebuild your credit score. You will need to be careful to avoid further debt, as well as sticking to a strict budget that will allow you to save enough money for a deposit.

Increase your chances of getting a mortgage

Rebuild your credit rating

After being discharged from your Trust Deed it may be an idea to take out a credit builder credit card, which are designed to help those with a poor credit history build their credit back up. It is important to note although these cards will have high-interest rates and a low credit limit – they prove your ability to make repayments consistently.

The best way to use these type of cards to avoid falling back into debt and further harming your credit score is to use it for a regular payment you know is affordable as you need to pay the full balance each month.

Save for a deposit

As your credit rating will be affected for some time even after your Trust Deed has ended this gives you time to save for a substantial deposit, this may increase your chances of getting a mortgage as the less you need to borrow the less risk the lender has.

Continue on the same – or a similar budget that you followed whilst in your Trust Deed and put the extra money into a savings account – if you have never owned a home before you should open a Help to Buy ISA and save any money for your deposit in here. With a Help to Buy ISA, the government will ‘top up’ whatever you have saved by 25%. The maximum you can receive from the government is £3,000.

Check your credit file

Once your Trust Deed has been discharged you should obtain a credit report from a credit agency such as Experian or Equifax to ensure your file is up-to-date to reflect you Trust Deed. Don’t just assume that it will automatically update once your finish your Trust Deed.

You should contact your creditors right away if your file hasn’t been updated, as when you apply for a mortgage, lenders will use this as one of the main points of reference to judge your ability to keep up payments.

Get a mortgage broker

When applying for a mortgage most people go it alone and approach their local high street banks. However, banks tend to be less risk-adverse and if you have previously been in a Trust Deed will most likely see you as high risk and not lend to you – or offer very high rates.

An independent mortgage broker may be a better option. They will have access to a wide variety of other lenders on the market who may be more flexible in their outlook to who they will lend to.

It is important you inform your mortgage broker about you Trust Deed when you first approach them as it will appear on your credit file when you apply for a mortgage so it is important to be upfront about it. Explain the factors surrounding your financial difficulties, some lenders may be more open to offering you a mortgage if they know the reasons behind your financial troubles.