If you’re a homeowner and your property is worth more than the amount owed on your mortgage, you may have to release some of its equity in order to proceed with a Trust Deed.
Mortgage equity is the difference in monetary value between what you owe on your mortgage and the current value of your property. The equity value is fixed at the start of your Trust Deed, so if the value of the property should go up, it doesn’t affect the conditions of your Trust Deed.
Where you have negative equity or a low level of equity, a threshold is set where the equity figure can be ignored.
If there is significant equity in your home, you’ll agree with the Trustee how to deal with this in advance. You may, for example, extend the Trust Deed term from 48 months to 60 months.
Where you have a large amount of equity in your home and a Trust Deed is not your best option – the Debt Arrangement Scheme may be more suitable for you, as equity in your home is irrelevant.
Your advisor will discuss this with you, and if necessary, any equity arrangements will be organised before entering into a Trust Deed.