IVA & Mortgage

Tighthead

Posting this for my brother-in-law. Got circa. £30k of unsecured debt plus a mortgage of £140k on repayment basis over 15 years or so. His income pretty much matches his outgoings with only goodwill from my sister (his estranged wife) and others that puts food on the table.

He is considering an IVA and is about to talk to CCCS, CAB etc for advice.

Q. He has had a remortgage approved with his existing lender in order to extend the term of his mortgage and therefore reduce the monthly repayment.

If he enters into an IVA, is the lender likely to refuse the term extension, in which case his position is worse? Or should he complete on the remortgage and then enter into the IVA, by which time his disposable income will be higher?

If he remortgages first, I suspect the increased disposable income will simply be directed to his creditors anyway and he'll see no 'real' benefit and will have paid more in interest in the long run. If waits until after the IVA has been set up, how would the IP react and would the lender be likley to play ball anyway?

Any advice gratefully received.

Thanks.

Charco_2

This kind of depends on whether you brother-in-law has any disposable income BEFORE remortgaging!

He needs to work out his incomings and outgoings NOT INCLUDING UNSECURED DEBT REPAYMENTS.

What's left over after he pays mortgage, council tax, food bills, electricity/gas/heat/light, car tax & insurance, petrol, tv licence... (this is obviously not an extensive list but there are templates around that he can use for ideas).

After he has worked this out he'll know what type of disposable income he has. If he needs to, THEN he can re-mortgage to free up some money.

If he needs to remortgage to fund a DMP or an IVA then he should do this BEFORE going into the debt solution but that doesn't mean he cant speak to someone in the meantime. (Possibly not CCCS as they'll discuss it with his creditors and word may get out that he's looking at an IVA - he can go back to them later for the debt solution if he wants).

PAY NO-ONE FOR ADVICE BECAUSE YOU CAN GET IT FOR FREE!

"If he enters into an IVA, is the lender likely to refuse the term extension, in which case his position is worse?"
Being in an IVA will almost certainly affect his remortgage
"Or should he complete on the remortgage and then enter into the IVA, by which time his disposable income will be higher?"
Depends on the Disposable Income now... if he has enough* then he may not need to remortgage, if he doesn't then it may be best to complete the mortgage and then do the IVA (*who knows how much is enough, speak to someone!)
If he remortgages first, I suspect the increased disposable income will simply be directed to his creditors anyway and he'll see no 'real' benefit and will have paid more in interest in the long run.
Pretty much. It depends if he needs the increased Disp Inc though! However, in the IVA, he will be paying for his own home comforts first and THEN paying towards the debts... not luxurious living but comfortable.
If waits until after the IVA has been set up, how would the IP react and would the lender be likley to play ball anyway?
It's unlikely the lender would play ball, you'd find doors would close and interest rates would go up! If your brother found that he had an increased income or more disposable income at any stage of the IVA then it's likely he would re-calculate the Income and Expenditure to work out what your BiL can afford and increase the payments to the creditors. (Sometimes if there are increases, the IP will only ask for ahlf of the increase, you get £100 a month pay rise, the IP will look for £50 increased contributions). Increases do not just go to increase the IPs earnings, it is for the benefit of your creditors!


(sorry for this long and windy monologue)

jobird_2

Slightly different scanario i have 18 months left can I get a mortgage now. or would it be best to wait until the end

jobird_2

apologise if i should not do this but did not know how to post a new thread

Nargleblast

No problem jobird. At the top of the front page of the forum (where all the threads are listed) you will see a load of "Stickies" then just above there a blue "New thread" button. Hit that and you will be able to start a new thread. Welcome on board by the way.

Tighthead

Charco - thanks for taking the time to reply, and accept my apologies for the delay in replying. I am very grateful and have passed on your thoughts. I suspect he will be better-off by completing the remortgage and then applying for an IVA. Even though it will inevitably increase the amount that he has to repay (which isn't a bad thing in my view) as his contribution is proportionate to his disposable income, he should better-off than now.

Kind regards.