Getting a mortgage after a Trust Deed

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One of the most common questions people ask about Trust Deeds is if they can get a mortgage after being discharged. The answer to this is yes, however, individuals who are considering going into a Trust Deed must understand that by doing so they are adversely going to affect their credit rating for a number of years.

The outcomes are variable but if you are paying into a Trust Deed for 4 years you will be unable to obtain any form of credit during this time. Furthermore, the amount you pay into your Trust Deed is regarded as your disposable income after all your necessary living expenses are taken off so it would be unrealistic to assume that you would be able to save money during this period for a deposit to buy a house.

Additionally, your credit rating will be affected for up to 6 years after your Trust Deed. However, this time could be the perfect opportunity to save a large deposit while you try to repair the health of your credit. Mortgage lenders will look favourably at people who have gathered a substantial deposit because their risk for lending is less, and it shows that you are prepared to shoulder a large proportion of risk yourself.

To ensure you maximise your chances of getting a mortgage after you are discharged from your Trust Deed, follow these golden rules;

Rule 1. Be the model customer.

Pay your bills on time and don’t get drawn back into the bad habits that saw you seeking debt advice in the first instance.

Rule 2. Live within your means.

It's easier to say and harder to do in reality but it's important that you get disciplined and live within your means. Set a budget plan and stick to it every month. You should be familiar with doing this by now because your money advisor will have talked you through monthly income and expenditures before entering your Trust Deed. Try to stick to the same budget and instead of paying your monthly Trust Deed fee, put the same amount away in a savings account. If your Trust Deed repayments were £235 per month by the time, your credit rating repairs itself you will have saved nearly £17,000!

Rule 3. Repair your credit rating.

You can aid this process by getting your hands on a credit card and paying it off in full each month. Rebuilding your credit footprint will go a long way in aiding with the mortgage application process. Use it for travelling costs or something that stays at a steady level each month. It will ensure you don’t start spending more than you want to, and it will keep it manageable.

Rule 4. Keep an eye on your credit score.

Make sure that creditors are updating your history. You might have to contact them to update their records, but it’s your credit rating so take responsibility for it and make sure it’s heading in the right direction over the coming years. To ensure lenders do not reject you, check your credit score before enquiring.

You can do this here;

Equifax

Experian

Rule 5. When the time comes, do your research.

Speak to the right person. Some companies will look more favourably on your situation than others so make sure you talk to someone that you are comfortable talking to. Perhaps a recommendation or friend of a friend just to make sure you are going down the right path. It's not just computer programs that make these decisions final. Some banks will go through your bank statements personally and query specific transactions over the past year, but provided you have stayed disciplined you will find that getting on the property ladder will not be a problem.