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 Seperation during a Trust Deed.
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Mastyk
New Member

4 Posts

Posted - 07 June 2021 :  15:30:45  Show Profile  Reply with Quote
Bit of a long post, but please bare with me. Very much in need of advise.

Both myself and my husband are in a financial trust deed - due to end Jan 2022. Our mortgage on our home is Help to Buy. The house is valued around 210,000 with a current mortgage of 106,000.

We are in the process of separating but want less upheaval as possible. This is the kids home. Ideally, we would like to remortgage to allow me 20,000 share then transfer the mortgage to his name.

We have many concerns regarding this. His salary is much less than mine - approx 21,500 per annum. There are so many unanswered questions:

A) should we apply for additional borrowing now - will this even be allowed? We have managed to get a new mortgage deal during this existing TD before
B) will the bank allow for him to keep the mortgage going with his salary.
C) I've been made aware, I couldn't get a new mortgage till 3 years after TD has ended.

What do we do, I am at a complete loss. We are struggling with the separation alone and want to keep things amicable but the unknown of how the TD will effect is, is becoming stressful.

Kevin Mapstone
Trust Deed Expert



3995 Posts

Posted - 07 June 2021 :  16:23:13  Show Profile  Reply with Quote
Hi Mastyk

I don't know if it would be possible to borrow more in order to pay you a 20k share and then for your husband to take on the mortgage himself, though I suspect probably not I'm afraid. Your trustee would need to sanction it too, which they might be happy to but I would suggest that it may not be in your best interests - any lump sum paid to you whilst in a Trust Deed is likely to be required to be paid over to your trustee for the benefit of your creditors.
Additionally, the transfer of the house into your husband's sole name may also complicate matters for his Trust Deed as the trustee may review how much his share is worth.

Is it possible that you could wait until the Trust Deeds are over for both of you before you seek to make these changes?

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TDA (Debt Adviser)
Trust Deed Expert



13754 Posts

Posted - 07 June 2021 :  16:29:40  Show Profile  Reply with Quote
Hi Mastyk,

I'm afraid it's very unlikely that a mortgage lender will offer extra lending to you while you're in a trust deed. Even if they did, your trustee could decide that the released cash should come to them to help repay your creditors.

It's also unlikely that the existing lender will agree to remove one of you from the existing mortgage as this would weaken their security. Being taken off the mortgage will also not (on its own) change the existing legal ownership arrangements of the house.

Have you discussed this situation with your own trustee at all? This is probably important as separating almost always leads to higher total expenditure (two houses rather than one) which can affect people's ability to pay into their trust deeds.

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DBHA21
Contributor

13 Posts

Posted - 07 June 2021 :  16:41:59  Show Profile  Reply with Quote
Hi Mastyk,

Sorry to hear of your separation!

A few points to unravel. The main one is that there will be an inhibition against you and another against your husband. This prevents you from selling or borrowing against any heritable property. Only your Trustee has the power to complete these transactions. So the short answer is that no, you cannot sell your share in the property to your ex-husband, nor can your ex-husband remortgage the property. Both of these transactions would require the Trustee's consent and they would only provide this if it was to the advantage (or at the very least, not to the disadvantage) of your creditors.

Should your Trustee agree to sell your share in the property to your ex-husband, the Trustee would likely require those funds to be paid to the Trust Deed and you would not receive any funds unless you could repay:

A. The balance of your debts at the time of signing
B. Statutory interest at 8% per annum
C. Your Trustee's costs and fees

If you have completed your first four years and you are now in an extension period to deal with equity (as agreed on the Form 1B), it's possible a Trustee may take a more lenient view, though this would be at their discretion.

As for additional borrowing whilst in a Trust Deed (or with one on your credit file), it is unlikely that there would be many - if any - providers willing to lend in these circumstances.
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Mastyk
New Member

4 Posts

Posted - 07 June 2021 :  17:43:49  Show Profile  Reply with Quote
Many thanks for the feedback so far. There is no rush for us to separate as we are financially tied together anyway until our individual trust deeds complete. Although these are separate, we do hold joint bank accounts and everything is paid together.

Our current home is a 3 bedroom and kids are settled here. It makes sense for my husband to keep this mortgage as he would not likely get another mortgage for this size of property on his salary. I earn more, so it is hoped I will be able to secure a higher mortgage and buy another home suitable for the kids to share their time equally.

I need to leave the family home with something to help secure a new future. As we are in a TD, we have no savings.

We signed the trust deed in Def 2016. Our last Annual Report states the trust deed is expected to end Jan 2022 so I assume this is the final year due to equity.

I just want to know how best to proceed.

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TDA (Debt Adviser)
Trust Deed Expert



13754 Posts

Posted - 08 June 2021 :  10:40:38  Show Profile  Reply with Quote
Hi Mastyk,

It's probably going to make sense to defer doing anything with your home until after you have both been discharged, if that works on a personal level of course.

Having said this, there's nothing to be lost by calling your trustee to see if they have any other ideas regarding the property based upon their close knowledge of your trust deeds. If you're in the period where equity is being dealt with then there might just be a little more flexibility.

Unfortunately it's likely to be a fair while after both of your trust deeds have ended until further borrowing, or a new mortgage, become possible.

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