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Interest Only Mortgages And A Scottish Trust Deed

Updated: 21st September 2016

Analysis of regulatory data by the Independent on Sunday (in 2012) revealed that up to 250,000 people with interest only mortgages were likely to reach retirement by 2020 without having cleared their mortgages. The Daily Mail has reported that more than 300,000 homeowners with interest only mortgages are at a real risk of losing their homes. Between 5% and 8% of such mortgages were in arrears at this point in time.

In this article we review some potential links between Scottish trust deeds and interest only mortgages.

If you’re struggling with debt you may already be very worried about your interest only mortgage. With a significant proportion of your income consumed by your debt repayments, it may well seem to be impossible to fund a savings plan to pay off the mortgage when it expires.

In fact it was estimated in 2012 that 80% of people with interest only mortgages had no effective mortgage repayment plan in effect. These problems are especially acute for those that are already in arrears with interest only mortgages.

Trust deeds (and other debt solutions) should generally be treated as a last resort. They normally deal with unsecured debts that simply cannot be repaid in any other reasonable way. However, for homeowners with problematic unsecured debts and an interest only mortgage, dealing with their unsecured debts may help them to establish a repayment strategy for their mortgage in the future.

Once a protected trust deed has been completed, the disposable income (your monthly payment) should become available to start paying off your mortgage balance. For example, if you have been paying £300 per month into a trust deed, this sum is now likely to be available to fund a new repayment mortgage (or to contribute into a savings plan for the same eventual purpose). Prior to the trust deed beginning, such a level of saving would almost certainly have been impossible.

In short, dealing with your unsecured debts now may create future opportunities to clear an otherwise stubborn mortgage balance.

For further information about the implications of trust deeds for interest only mortgages, you may wish to visit our forum. A panel of debt advisory experts are available to share their knowledge, thoughts and opinions with you.

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