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Getting A Mortgage After A Scottish Trust Deed

Updated: 22nd September 2016

What You Need To Know About Mortgage Lenders

Since the credit crunch of 2007 it has become much more difficult for anyone to get a mortgage. Having been through a Scottish trust deed will make these difficulties even more challenging. Mortgage lenders are now being extremely cautious about the risks that they take when lending. Understanding their perception of risk (or “thinking like a lender”) will help to put you in a position where you can get a mortgage in the future.

The mortgage market fell apart because lenders and consumers took too many risks. With hindsight those risks which became unfortunate realities can be summarised as being:

  • High loan-to-value lending . If a mortgage lender offers a 95% or 100% mortgage they are much more likely to take a loss if the property later declines in value.
  • Low (or zero) borrower deposits . The less money a borrower puts down as a deposit, the less they stand to lose if they later have the home repossessed. The vested interest to fight to keep the property (by making the mortgage payments) is reduced.
  • Lack of affordability . If a mortgage lender offers too much credit to a borrower they may push them into financial difficulty in the future (as they fight to keep their home by borrowing more and more money from other sources).
  • Accepting poor credit history . Lenders use previous behaviour as a tool to predict future behaviour. Prior to the credit crunch this factor was downgraded in importance to the cost of both lenders and borrowers.

This recent bad experience (for lenders and borrowers) informs the current lending rules and criteria that are in place. Whether you have been through a Scottish trust deed or not, if you want to get a mortgage there are certain things you can do to improve your chances. Primarily these are to save the very biggest deposit that you can, to be realistic about the value of property that you will purchase, and to work hard on your credit rating to make it the best that it can be.

What You Need To Know About Mortgage Brokers

If you have been discharged from a trust deed you may be keen to approach mortgage lenders yourself to try to arrange a mortgage. Many people will visit their local High Street banks to see whether the advisers can arrange a mortgage for them. More often than not this will be a total waste of your time and effort. High Street banks are amongst the very most risk-averse mortgage lenders in the UK.

There are many other mortgage lenders that aren’t on the High Street, most of which you will probably never have heard of. Mortgage brokers know who these other lenders are, and they also know that such lenders are often much more flexible in their outlook about what types of client they’re prepared to lend to.

You will want to find an independent mortgage broker, ideally based locally to you so that you can go through your needs and circumstances with them face-to-face. A recommendation from someone you know is always helpful when looking for a mortgage broker. Make sure you choose an “independent” adviser that has access to a wide variety of potential lenders. It should be possible to choose a mortgage broker who will scan the market for you without charging you a fee.

Make sure that you tell them everything. For example, withholding information about your protected trust deed is only likely to cause frustration (and possibly expense) later when the truth comes out and mortgage offers are withdrawn.

A good mortgage broker is a vital ally when trying to arrange a mortgage in the months or years after trust deeds have ended.

Creating Your Mortgage Action Plan After Your Scottish Trust Deed

The sooner after your Scottish trust deed ends that you start planning (and executing that plan) the sooner you are likely to have access to the mortgage lending that you want. The main areas that you will need to plan for are to:

  • Save up a really substantial deposit . This is likely to take some effort, some time, and to require some lifestyle sacrifices. Are you able to put your full (ex) trust deed payment into a savings account every month for example? Remember that you will also need to save money for other property buying costs as well as a large mortgage deposit. A big deposit means a lender is less exposed to your property falling in value, and more inclined to believe that you’ll fight to keep your home. You’re a much less risky client in their eyes.
  • Review your credit history after your trust deed . Don’t assume that everything will correct itself after you have been discharged. What goes on your credit file is what your creditors have reported to the credit reference agencies. If they haven’t taken the appropriate steps after you have been discharged from your Scottish trust deed you’ll need to encourage them to get on with it. We like the CreditExpert Trial for this purpose, and suggest you read our articles about default notices and your data protection rights to guide you in this process. Making your credit report accurate is likely to make you appear to be a less risky borrower.
  • Establish some new good credit history . Some types of borrowing can help you show prospective mortgage lenders (via the credit reference agencies) that you are now fully in control of your finances again after your trust deed. Mobile phone contracts might be useful, and making sensible use of a credit card could be an especially positive move. However, we strongly advise you to avoid payday loans as they may stop you from getting a mortgage.
  • Remember that “affordability” is important . Mortgage lenders need to know that you can afford the mortgage repayment. If you start to build up new credit card balances, or other financial commitments like HP on a car, it will reduce the amount that they are prepared to lend to you. Making good use of credit can help you get a mortgage, building up substantial new credit balances and repayment commitments will not.

Time is the final important factor. The longer ago your Scottish trust deed started (and finished) the more likely it is that you will gain access to mortgage borrowing. Saving a deposit, sorting out any problems on your credit file, and making some good use of credit again are all things which will take some time. All the while your trust deed will be receding further back into history, which may well be another positive factor that works in your favour when you decide that you are ready to make your mortgage application.

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Wylie & Bisset Grant Thornton

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