Must Know Trust Deeds Disadvantages

A Trust Deed can be defined as the document which states the legal agreement between a lender, borrower and a third party known as Trustee. The borrower hands over the legal rights of the property to the Trustee, as a sole reason for security for the benefit of the lender. The Trust Deed can also be called as a Deed of Mortgage in some places. Following are some of the must know Trust Deed disadvantages.

Trust Deed Disadvantages

  • Usage Of Equity By Homeowners To Pay Off Creditors

According to a Trust Deed, if a homeowner holds any kind of equity in relation to his or her property, then that equity should be released fully to accommodate funds to pay off creditors. There are various alternatives to this idea though – like going for remortgaging, or doing extra payments or even increasing the overall life of the Trust Deed.

  • Credit Rating May Take A Hit

This is the one most overlooked fact, but a Trust Deed can be a serious issue for a borrower’s credit rating. This will be a part of the borrower’s history, so any future transactions like taking loans or even obtaining a credit card will become a very difficult process. More worse situation would be like non-payment of dues or increase in debts, that could single-handedly destroy a borrower’s credit rating.

  • Not Destined To Be Always Successful

Decisions of the creditors are very much crucial in making the deed successful. If the creditors do not agree with the terms offered by the Trustee, there will be no such protective status vested on the Trust Deed.

  • Terms Cannot Be Changed Easily

Here again, without the agreement of the creditors, the Trust Deeds becomes an inflexible piece of document. Plan to reduce monthly payments? Cannot do that without the agreement of the creditors. Trust Deeds can also fail sometimes due to various changes in circumstances and the borrower would still be liable for all the debts or even can be forced into bankruptcy.