Protected Trust Deed - Is My House Safe?
A very common question which we get asked by people who are suitable for a protected trust deed is, will my house be protected?
The simple answer is yes however equity will need to be established during the term of the trust deed. In some instances a person may not be suitable for a protected trust deed if they have too much equity in their property. Equity can be released in a range of different ways, such as, re-mortgaging or third party finance. If your house is in negative equity you will normally be asked to pay a nominal fee to discharge your Trustees interest in the property.
What is equity?
Equity is the difference between the property value and the outstanding mortgage, minus the legal and admin fees etc. If the mortgage value is higher than the property value then the property is considered to be in negative equity.
What if i inherit a house?
If you inherit a house before or during your protected trust deed then you would be required to release equity from the property and you may be instructed to pay back the full amount of debt (plus an interest payment) if it is possible. The same would happen for other windfalls too.
What if i sell my house?
When you enter a protected trust deed you are telling you creditors that you are unable to pay back the full amount of debt you owe. If you come into money while in a protected trust deed, you would be expected to pay this into the arrangement. The insolvency practitioner is the Trustee of your estate so selling your property would require their involvement.
What if I joint own my property with my partner?
If you joint own a property with anybody else you would have to realise your share of the equity. So, if after legal and admins fee's there was £10,000 then you would have to contribute £10,000.