October 01, 2014

    As with anything else, trust deed investing has both its advantages and disadvantages, depending on your reason for seeking one out. Trust deeds are secure investments that are sought after by investors having several levels of capital available.

    Consolidating Debt

    Where the consolidation of debt is concerned, a trust deed can place several balances into one convenient monthly payment. This eliminates calls from creditors, thereby greatly reducing stress. As well, consolidating debt into a trust deed gets rid of interest payments. Creditors have no reason to take legal action against you as long as you are making payments. The set term of a trust deed is also good for those with debt, as it clearly states when debts will be paid.

    Another great advantage of the trust deed is that after its typical duration of three years, any debts included can be written off completely.

    Buyer and Seller Advantages

    For the buyer with poor credit, a trust deed can offer many distinct advantages. The ability to sign an agreement directly with the property owner and eliminate the need to deal with mortgage lenders and banks can mean much money saved. Another advantage of the trust deed to buyer is that it enables them to invest in real estate that may often be far out of the buyer’s price range.

    For the seller, the trust deed allows the seller to have more freedom where it comes to financing. A seller can either offer their own financing, or seek financing from third parties. Mortgages financed by the seller allow those who own real estate to enjoy regular payments over the long term as opposed to receiving a single lump sum.

    Buyer and Seller Disadvantages

    Despite the many benefits to buyers and sellers, a trust did is, essentially, a large personal loan. This can mean a larger degree of risk to the borrower. Bankruptcy is likely the most dreaded consequence of the trust deed, which can affect credit for years to follow, and even cause a family to be homeless. Another disadvantage to buyers is that trust deeds do result in a higher purchase cost of real estate.

    For the seller, trust deeds can mean less income when compared to leasing a property. Because the real estate industry itself can often be more reliable than the sale of real estate, a seller can find themselves at a disadvantage. As well, the third-party element of trust deeds can mean a more complicated process than that associated with simple mortgages.

    Change in Circumstances

    Should financial circumstances change and creditors will not accept amended terms, this can cause the failure of a trust deed. It can also mean that the full amount owing to creditors will be required, minus what has been paid via the trust deed arrangement.

    The world of trust deeds can certainly be confusing. Thankfully, there is a wealth of information online and experts who can help you decide whether getting into trust deeds makes sense for you.