Getting a mortgage soon after a Scottish trust deed is hard. It might turn out to be impossible. Mortgage lenders have a low risk appetite, though this has been improving. A previous trust deed gets seen by mortgage providers as a major risk factor.
We don’t know of any mortgage lenders that will lend within one year of discharge. We’ve only heard of one that will lend within two years of discharge. Once your trust deed has been discharged for two years or more, more mortgage products become available. Please note we’re not mortgage experts and this market changes constantly. Contact a mortgage broker for information about current lender acceptance criteria.
How can you improve your chances of getting a mortgage after a trust deed? It’s important to understand how mortgage lenders assess risk. We describe this approach as “thinking like a lender”.
High loan-to-value lending is risky for a mortgage lender. This lending occurs when your mortgage deposit is small. If property prices fall, the lender will begin to lose their security. If you default, the property value could be lower than the mortgage balance. If you have little equity, there’s less for you to fight for if money gets tight. With past credit problems, it’s especially important to save up the largest deposit you can. You’ll gain access to more mortgage products on better lending terms.
Affordability is a key test for mortgage lenders. They check you can afford your new mortgage payment. They’ll assess your income, bills, and expenses when calculating this. If you’ve built up new debts, it will reduce the size of mortgage they’ll offer you.
High street banks are very cautious mortgage lenders. If you recently got discharged from a Scottish trust deed, they’re unlikely to lend to you. There are many other mortgage lenders that aren’t present on your high street. You won’t have heard of most of them. They occupy lending niches that the major banks avoid. These niches include persons with imperfect credit histories. Many such lenders will not deal with you directly. They deal instead with independent mortgage brokers.
We recommend that you contact an independent mortgage broker. In the years after a trust deed, they’re your best bet to find a mortgage product that meets your needs. If possible, get a local broker recommendation from a friend or colleague. Be entirely open and honest with the broker. Your honesty will help you to avoid disappointment and wasted time later.
Some mortgage brokers will tell you that getting a mortgage is impossible. They may say you cannot get one until six years after your discharge. This is untrue and signals that this is the wrong mortgage broker to use. They don’t understand the impaired credit mortgage market. Other mortgage brokers specialise in this area and are better able to help you.
In summary, to improve your chances of getting a mortgage after a trust deed:
1. Save up the largest deposit you can.
2. Be realistic about what you can afford.
3. Ensure your credit report is accurate.
4. Build up some positive recent credit history.
5. Don’t build up too many new debts or commitments.
6. Allow time; the longer ago your discharge the better your chances.
7. Use the services of an independent mortgage broker.