Hi Nemo

The debt sits outside the Trust Deed and will be your responsibility to repay it with the banks agreement.

Its an interesting scenarion if the house is to be valued at the end of the 3 years. If this was the case, then surely the value and also the redemption, including the £2100, will be used to calculate the equity.

Mark

Hi Mark,
The agreement is- after 3 years my house will b valued. If there is any equity then our TD's will be extended by no more than 24 months and we will never pay more than the equity value. But with this £2100 on the reserve, the equity will be less? So what would happen?

Hi Nemo

The Trustee may require to take account of this, thereby reducing the equity. I assume he will request the valuation and also the bank to provide a mortgage redemption which will be inclusive of this amount.

Mark

If we are unable to pay it back, would the trust deed then be extended to cover this amount?

Hi Nemo

Only your trustee will be able to answer that unfortunately.

Mark

Eeeeeeeek!!

Hi. I have a question based on this thread if thats ok.... If the mortgage and other secured loans sit outside the Trust Deed, then is it not possible ( arguably favourable ) to deliberately tap into the reserve or miss a payment etc before the final valuation in order to reduce the equity payable at the end of the term. I currently have a secured loan which permits 2 payment holidays per annum. Is it therefore possible to take advantage of these holidays throughout the term of the trust deed in order to reduce the equity at the end of the term whilst providing me with additional disposable income during the trust deed period?.

Supoose I would be required to declare the additional income ( or reduced outgoings ) to my trustee though so technically would be no further forward.

In theory yes. Its the main reason why equity should be agreed at the start and not at the end when the whole landscape could change. The proposal the creditors receive needs to be as accurate as possible to allow them to make an informed decision.

Debt values freeze on day one, so why not assets?

Mark

Whilst it is an interesting question, for most IP firms these days it is a moot point really as the equity is established at the start of (or immediately prior to) the trust deed and is not recalculated subsequently - giving both creditors and debtors a lot more certainty.

Unfortunately, for Nemo1 and others in he same position, there is no such certainty. At least there is the possibility that the housing market drops sufficiently during the trust deed and the equity is less at the end. If it were me I think I would rather just have the certainty of knowing what has to be paid throughout.

Unfortunately I never found this site until after everything was signed.. 🙁