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Your guide to getting a mortgage after a Trust Deed

Sharon McDougall - Updated - 29th April 2024 - 4 minutes to read

This article is for individuals in Scotland who have queries about debts or Trust Deeds. We cannot provide mortgage advice.

If you’re about to be discharged from a Trust Deed, you may be wondering to what extent your ability to obtain a mortgage has been affected. It’s a common concern for anyone who has struggled with debt, that they won’t be able to borrow in the future, and the general reluctance of banks to lend is not helping.

The good news is that it’s possible to obtain a mortgage after a Trust Deed, but it will take some time and planning. Once discharged, you’ll need to stick to a strict budget that factors in saving for a deposit, as well as avoid further debt and rebuild your credit rating.

How does a Trust Deed work?

Trust Deeds generally last for four years, during which time you make affordable repayments to the unsecured creditors included in the arrangement. Once the term ends, any remaining debt is written off.

The credit reference agencies are informed of your circumstances, and the Trust Deed appears on your credit file for six years following its inception. While the Trust Deed is in existence you won’t be eligible to borrow at all, and for the six years the Trust Deed is on your credit file your options will be very limited.

Even when the Trust Deed is removed from your credit report, lenders will be unlikely to offer favourable terms. So is there any light at the end of the tunnel? By understanding the criteria lenders apply when assessing risk, avoiding further debt, and saving consistently, you may be able to obtain a mortgage in time.

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What influences your chances of getting a mortgage?

Saving for a deposit

A higher deposit is one of the biggest factors in your ability to obtain a mortgage because it reduces the lender’s risk. They may offer you lower interest rates and reduced administration fees, as well as providing access to a wider range of options.

Factoring an amount for savings into your budget is crucial if you want to get a mortgage following a Trust Deed – perhaps some of the money that was used to repay creditors each month could be put to one side.

Rebuild your credit rating

‘Credit builder’ credit cards are designed to help people with a poor credit history. Although high interest rates are applied alongside a low credit limit, these cards help to demonstrate you can make repayments consistently.

You’ll need to pay the full balance at the end of each month, so it’s a good idea to use it for a regular payment you know is affordable, rather than smaller amounts that can quickly add up. Failing to repay this type of card will result in heavy penalties, and further long-term damage your credit score.

Check your credit file

There are three main credit reference agencies in the UK – Experian, Equifax, and Callcredit. You can obtain a credit report from any or all of these companies to check the information they hold is up-to-date, but you may find that each one has slightly different information about you.

You should contact your creditors if your file hasn’t already been updated – doing this increases your chances of obtaining borrowing in general, as it’s one of the main reference points when lenders assess your ability to repay.

What is the danger of approaching lenders yourself?

When you apply for borrowing, the lender searches your credit report to establish credit-worthiness. In doing so, a ‘mark’ is left on your credit file and if you are refused by the lender, it can negatively affect your chances with other institutions.

For this reason, it’s a good idea to approach a ‘whole-of-market’ independent local mortgage broker – preferably one recommended by someone whose judgement you trust. You’ll be able to explain your circumstances in person, and gain from the broker’s wide knowledge of products on offer.

They will narrow down your best options, so reducing the chances of your credit file being adversely affected by lender scrutiny and rejections.

It’s also worth knowing that lenders are influenced by the factors surrounding your debt problem. It you can point to a specific event that caused the issue, such as redundancy or illness for example, they may be more open to offering a mortgage once you’ve been discharged from your Trust Deed.

Scotland Debt Solutions works on behalf of Scottish residents, by offering professional guidance and practical assistance to escape the debt spiral. Call one of our five offices in Scotland to arrange an initial appointment free-of-charge.

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Sharon McDougall Square

Sharon McDougall

Manager

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