iva help needed

weary

hi, just about to go into an iva has anyone had to sell their home at the end of it to release equity? and would a dmp require the same risk?
thanks

Charco_2

No a DMP would not requie the same risk but similarly a DMP does not offer the same protections.

How much equity do you think your house will have by the end of the IVA?

weary

hi,
well there's about 20,000 now so more than that in 5 yrs

Charco_2

Do you have a partner? Is all the equity yours?

weary

yes joint debts

Charco_2

Are you both considering an IVA then? Who are you using?

Basically, at some stage over the course of your IVA you will be expected to realise the equity in your home. In an IVA there are three or four ways this can be done - some are more realistic than others and depend on how much equity is available.

1. If you were expected to release less than £5k of equity then the best for this to be done would actually be to extend the IVA by a year and simply let you make 12 further monthly contibution
2. A friend or family member might be able to lend you the money and you would pay them back after you have been released from the IVA.
3. Re-mortgage. Obviously solutions 1 & 2 are preferable and avoid having to re-mortgage at a sub-prime rate which means you're paying back more money for longer
4. It might be possible to get a secured loan for the outstanding balance which avoids moving your whole mortgage onto a sub-prime interest rate.

I suppose option number 5 would be sell your home and start again in a year or two when your credito file has cleaned up.

Charco_2

Actually, let me just look out the general terms and conditions. They generally stipulate that for the avoidance of doubt you WONT be forced to sell your house - this can sometimes be over-ruled by a modification if the creditors ask for it.

Under £5k the equity might be ignored/exempt. Over £5k you have the options above. If you are UNABLE to find a suitable re-mortgage however (you will not be allowed or expected to remortgage if it increases your repayments by over a certain amount) then a claim can be out on your house until such times as you ARE able to realise the equity.

A DMP offers no protection from this however. If you have a large amounts of equity your creditors can (and likely will) try to have a claim put on it.

weary

thanks,so in other words we would have to release equity at some stage but with an iva on file who would give us a mortgage? im swaying towards the dmp but dont really understand the differences apart from the length of time to pay back and obviously having to pay it all,with cccs havn't signed anything yet.
thanks

Charco_2

A DMP will offer you no protection and you'll have to pay the whole amount of your debts back over a considerably longer period of time. If you have equity in your home your creditors may attempt to attach their debts to it through the courts - and of course hand you the fees for doing so! Thus securing their unsecured debts. (tis worst case scenario)

An IVA will offer you protection from your creditors and mean that you may your affordable contributions for five years. You will be required to realise the equity in your property in this timeframe and depending on how much this is there will be different ways this can be done (one of them being a sub-prime mortgage which would be worst case scenario)

Pleas also bear in mind that although you say you currently have about £20k equity for the purposes of your IVA, the amount of REALISABLE EQUITY would probably be much less... it's kind of understood that you probably wouldn't get a mortgage for more than 85% the LTV of your property

(in simple terms:
- If your house is worth £100,000 and you have £20,000 equity - then your mortgage is currently £80,000.
- At 85% LTV you are only likely to be able to release a further £5,000 not the full £20,000)

Does that make sense?

*** LTV means Loan-To-Value. It's a ratio. Most lenders will only lend you 85% of the value of your property some might offer 90%. So although you might have £20k equity if you sold your house, to remortgage your house you might not even have any equity!***

weary

clear as mud (head in the shed) so iva would be best then the only debts we have problems paying are the cc's but they have lumped in everything,but the other debts we can manage each month,just got into bother with the cc's when i was out of work.

weary

thanks for your help today,i'll check in later