Go Interest Only to avoid IVA?

Webbigail

Hiya,

My husband and I are looking at doing an IVA after speaking to CCCS it looks like our only option...however, if we go to interest only on our mortgage we would have a further £400 per month. So my question is should we go to an interest only mortgage and then set up a DMP with our creditors ??

To me this sounds like a good option as we would be able to offer our creditors more?

Tixy

Interest only on a mortgage can help people out and be useful if you intend to do it for only a fairly short period. Obviously it cannot be a long term solution as the capital element of your mortgage will need repaying at some point. But if you are planning on doing for only a year or 2 and it doesn't mean your mortgage term will extend beyond your retirement age then consider it.

Also if you are currently in negative equity think very careful before switching to interest only as you will not be working your way out of the negative equity which is obvioulsy not good if you need to sell in the future.

Would you still need to do a DMP if you had an extra £400 pm? Do you have a monthly shortfall of more than £400? Also you need to be aware that once you are in a DMP your credit rating will be affected and you will find it harder to get the best mortgage rates that are on the market.