Second Charge Mortgage vs Protected Trust Deed

edited 25 February 2019 at 8:23PM in Debt-free wannabe
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soutermonsoutermon Forumite
35 Posts
edited 25 February 2019 at 8:23PM in Debt-free wannabe

After being a bit too eager to buy our first house before clearing some of our debts, things are starting to pile up with no sign of being debt free on the near horizon. As things stand, I have approximately £30,000 of debts between credit cards and loans for Home Improvements. I'd estimate that I'm paying in the region of £900-£1,000 a month on this alone. It's worth mentioning that I am keeping up to date with the payments, but it doesn't leave me with much else after, meaning I cannot pay any more than the minimum monthly amount.

Ideally I would have liked to obtain a consolidation loan, but the only ones that have come back as obtainable so far are £15,000 at 36.9% APR or £10,000 at 49% APR, so I'm not even entertaining that.

I have spoken to the National Debt Service in Scotland, and they have suggested a Protected Trust Deed. Now, the idea of paying less monthly and maybe not even paying the full amount back interests me, but the affect on my credit rating for the future worries me, especially with regards to remortgaging.

I've also spoken to my mortgage broker, as I wanted to know what the potential for remortgaging whilst in a PTD was. He has said that a Second Charge Mortgage is another option, and crucially, one that won't affect my credit rating as much. This sounds great, but I'm wary of the fact that he is likely only after a brokerage fee, and that adding more debt to the mortgage would wind up in us paying more interest, all be it over a longer period, so therefore more manageable. To put it in context, our house value is approximately £130,000, with just shy of £100,00 left to pay, and our 2 year fixed term up in January 2020. His suggestion (including rates) is as follows :

"Further to our discussions earlier, I think it may be possible to potentially secure a second charge loan even up to 100% of the Mortgage Value of your home less the outstanding Halifax Mortgage Facility of £99778.

Rates would indeed be in the 10% to 12.5% Bandings, however may allow you to consolidate meantime, Extend the Term and thereafter look to potentially cash raise to take out the 2nd Charge in 2020 (On Expiry of your Fixed Rate): We could of course review your existing Mortgage and Cash Raise with additional borrowing with Halifax? Or Other Lender."

In his suggestion, is the 10-12.5% the interest on the full mortgage, or the £30,000 on top of what is outstanding? What does he mean by then taking out the 2nd cash charge in 2020, is this my actual remortgage?

Can anyone give any advice on what the better option would be? I'm so lost and struggling to see a clear best option.

Thanks in advance (and even for reading my long winded post!)


  • If the broker is suggesting a LTV of 100% for 1st and 2nd mortgage, I'd suggest you get a second opinion on that.

    Clearly a secured loan (2nd mortgage) gives you a better interest than a PTD which has restrictions. There is a simple explanation here but note the comment about raising further funds.

    You should take legal advice or see a local debt charity. Scots law is different from the other 90% of the UK so local advice should be taken rather than from the internet where most will not be familiar with the differences.
    Unlike some here, I am not omniscient. If I am wrong correct me. I won't take offence.

    The law is like an ocean - have a swim but don't drown.
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