I'm fairly sure the affordability (based on income and expenditure) has to change for payments to change.However, I don't know if equity figure is covered by the total which would be received - in your case 24 extra payments?

Hi Nemo1.

RBSB is correct.

You'd usually be asked to pay at the rate you can reasonably afford until the amount due has been cleared.

Yes, 24 extra payments. I was told that it will definitely not go beyond the 24 months. Not sure what the equity amount will be in 3 years time as the house gets valued again then...

Hi Nemo1

It's incredible that you are in an arrangement with a firm who have failed to advise you how long it will last, what the payments will be, what the equity figure is and even more surprising that the property will be revalued at the end. Yet despite this, the psychic they obviously employ can tell you it certainly won't extend beyond an additional 2 years.

I cannot see why a firm cannot sit down with someone, look at the options, agree the contribution and equity figure before anything is signed and then agree a definite plan with a start and end date. The AIB guidance clearly states that Trustees should not wait till equity accrues in property.

If its valued in 3 years and you need to extend it by another 2 years to pay the equity, will they value the property in year 5 again?

Mark

It's my fault I guess for not asking more specific questions.. But I do remember at first they said the property would not be valued again, and then a while later they said the property would be valued again 3 years in.. Is there a law somewhere that these companies have to bide by?? I would certainly be a lot happier knowing exactly what my payments will be and how long for. However as I have now signed everything there's not much I can do. My real worry is that I'll have 3 years of mortgage payments under my belt, and when the 3 years is up, I'm going to be mortgages to the max , IF I can remortgage. And if not, then my payments will b sky high to cover the equity or go on for even longer than the additional 24 payments..

I am with Wilson Andrews, who I must say have been great since the very beginning.. But obviously I wouldn't really know any better!

Hi Nemo1

We all work under the same legislation and guidance. Unfortunately it is the guidance which is open to interpretation. I am not aware of any legislation or guidance which states that the property be valued ( again) at the end.

Any Trust Deed proposal should provide a clear path ahead with no unknowns. The position regarding equity should be clearly stated before signing anything.

Wilson Andrews occassionally contribute to the forum with their own cases to try and resolve issues and perhaps they could shed some light on this.

Mark

It would be good for Wilson Andrews to pop on and clear this up.

Paul

Hi Nemo1

To answer your original question, if you cannot remortgage up to 85% of the value of your home and release equity at the end of the 36 month term then the arrangement will be extended by 24 months in lieu of your equity.

Your contribution is still based on affordability so will continue at the rate you are paying at month 36, unless anything else has changed in your circumstances.

It is worth noting that you would only pay for 24 months if the equity figure is more than 24 x your contribution. So the maximum you would pay for is up to 5 years in total and this could be less depending on the amount of equity you have.

The property is valued at the beginning of the Trust Deed to establish the position regarding equity then again at the end to re confirm the position. It may not be the case that equity has increased but decreased and therefore there is no equity at all to release.

Before the Trust Deed is signed the issue of equity and any other assets is always addressed and a full explanation provided of how assets will be dealt.

We offer every customer a face to face meeting to discuss their paperwork and many of our customers do choose to do this.

We do put great emphasis on ensuring that our customers fully understand and are happy with all aspects of their Trust Deed before signing their documentation.

I hope this has cleared things up, if we can help any further please let us know here or by calling your Insolvency Practitioner.

Hi Sarah

Many thanks for the response and for clearing things up.

It's an interesting point you make on the property and as you are no doubt aware it is probably the single biggest contentious issue in trust deeds.

If you had a case where there was £5k based on valuation/redemption at the start and the property reduced in value on year 3, would you write off the £5k? Similarly if it increased, would you seek the original £5k or the increased amount.

Mark

I think a few people reading this were confused by the 24 month element mentioned.

Most commonly we've heard that the full amount of any equity (which might be calculated at the start or end of a trust deed) must be paid into it. People reading this thread earlier may well therefore, like me, have been confused as to how a 24 month payment for equity could be confirmed before a valuation had taken place.

As Mark mentioned earlier, there an be variations of interpretations of the guidance trustees work under. The senior team at Nemo1's firm have kindly contacted us today to explain how they operate, which makes all of this much more clear.

They set up arrangements on the basis that a property will be revalued at the end of a trust deed. The equity can then be raised by way of an 85% remortgage (which most people currently will struggle to get) or by extended monthly contributions. The arrangement however specifies that these contributions are capped at the two year mark (24 payments).

So when starting a trust deed on these terms you don't know exactly what will transpire with the equity, but you certainly know the worst case scenario. If property prices are falling it may even work to your advantage.

Confusion resolved... hopefully!

Thanks TDA

Surely though if a client was entering into a trust deed it would be far better to know what has to be realised at the beginning and that agreement put in place at the start.

Hi Mark

Thank you TDA.

If we did have a case that, as you say, was based on £5k equity at the start and the property dropped in value by month 36 then yes the original £5k would not be available and the client would not expected to realise this sum.

As you know house prices have been falling in many places in Scotland over the past few years. As a result we quite often find clients where there was equity in the property at the start of the TD, but the equity has fallen (or disappeared) by year three. In these cases there is a clear benefit to clients of getting the second valuation in year three.

Of course the converse is true, if a property increases in value over the life of the Trust Deed (and the client is unable to remortgage) then the client would need to make additional contributions into their Trust Deed. Our standard approach is to limit the extra contributions to 24 month's worth (or less than this if the client can clear all of the equity in few contributions).

Naturally we discuss this with our clients at the outset of their relationship with us and of course throughout their time with Wilson Andrews.

Thank you very much for everyones replies, it would appear that I just didn't quite understand it properly! But I do now, thanks again for all your help 🙂