IVA and my mortgage - will it be worth it if I have equity in 54 months time?

needleofftherecord

Hi I am brand new to forums so please let me know if I am doing it right!

I have £37 K debt (on credit cards and including my £2500 overdraft) - just opened a new bank account (Nationwide) and got paperwork to start an IVA - this would mean a payment of £165 per month into IVA but my concern is that my mortgage may have gathered equity by month 54 of the IVA (when I beleive they can step forward and demand some of that equity)

I am so confused!! I need to get a handle on what will happen at month 54. Here are my figures:

I earn £1400 per month
Am single, home owner (mortgage), no regular extra income (mm sounds like a lonely hearts ad - any random millionaires reading this might be the answer to all my probs? )
Property worth £90k - £77K outstanding on mortgage (cant remortgage - not enough equity)

Anyone out there in similar position? Any advice on where to start on working out my options if I DO go IVA route?

I am searching the posts and will continue to do so - its helping to face up to things and see that there lots of folk in same position - so thanks everyone!

trudij

You are doing MOST things right - except one....


I have first dibs on any random millionaires (and if they are a hundred years old,so much the better ) that pop up. Sadly I dont think we will find any on the IVA forum !!!

Someone will be along later Im sure with some "real" help for you - but well done and welcome !!!

immoral_angeluk

Is there a clause in your IVA which states that they may ask you to revalue and possibly remortgage nearer the end of the IVA to release any equity to pay off creditors?

needleofftherecord

Thanks for replying! If I go ahead with the IVA there WILL be a clause asking me to revalue and release equity in month 54 - however, it cannot take my monthly mortgage payment above an additional £80 per month - I need to work out the figures in more detail but was wondering if anyone else had been thru this?

OR if anyone else found a millionaire in ailing health? (trudij we can go halfers!)

trudij

deal - might get rid quicker if theres two of us...

Charco_2

Perfectly normal and reasonable that you would have to realsie the value of any significant assets for the benefit of your IVA - you are asking the creditors to "forgive" a certain proportion of your debt so you should do your level best to pay as much as you can in the meantime.

This includes realising the equity in any property you have, selling your stock portfolio and cashing in on any paintings you have by the Old Masters... But nobody is really asking you to call in the Cash in the Attic crew!

The equity you will have to release will be calculated on about 85% of the value of your home - this is the amount you could reasonably expect a mortgage company to be willing to lend to you. So if your home is worth £100k and you've a mortgage for £90k already then (instead of having £10k equity) for the purposes of your IVA you actually have NO REALISABLE EQUITY.

You will not be expcted to sell your home, and as you said above, any increase to your new mortgage payments cannot be by more than a certain percentage of your monthly contributions to your IVA. (If you pay £160 a month to your IVA then your new mortgage payment can only go up by £80 a month - something like that!)

Ways that you CAN release the equity:
1. No Equity - nothing to release, IVA ends after five years.
2. Around £5k equity - it's not worth remortgaging or getting a secured loan, the best option is actually to extend the IVA by a year.
3. Over £5k - You may be expected to remortgage/get secured loan for this, a friend could also lend you the money (or a make an offer instead of the money - ie you should release £8k but your friend will lend you £5k).

The only way to calculate whether it's a better solution for you however, is to go through the figures.
- How much debt?
- Expected monthly contributions?
- Current Equity? (it'll be anyone's guess in five year's time)
(and that's just a starting point!)

Mad_girl

Charco wrote: »

Perfectly normal and reasonable that you would have to realsie the value of any significant assets for the benefit of your IVA - you are asking the creditors to "forgive" a certain proportion of your debt so you should do your level best to pay as much as you can in the meantime.

This includes realising the equity in any property you have, selling your stock portfolio and cashing in on any paintings you have by the Old Masters... But nobody is really asking you to call in the Cash in the Attic crew!

The equity you will have to release will be calculated on about 85% of the value of your home - this is the amount you could reasonably expect a mortgage company to be willing to lend to you. So if your home is worth £100k and you've a mortgage for £90k already then (instead of having £10k equity) for the purposes of your IVA you actually have NO REALISABLE EQUITY.

You will not be expcted to sell your home, and as you said above, any increase to your new mortgage payments cannot be by more than a certain percentage of your monthly contributions to your IVA. (If you pay £160 a month to your IVA then your new mortgage payment can only go up by £80 a month - something like that!)

Ways that you CAN release the equity:
1. No Equity - nothing to release, IVA ends after five years.
2. Around £5k equity - it's not worth remortgaging or getting a secured loan, the best option is actually to extend the IVA by a year.
3. Over £5k - You may be expected to remortgage/get secured loan for this, a friend could also lend you the money (or a make an offer instead of the money - ie you should release £8k but your friend will lend you £5k).

The only way to calculate whether it's a better solution for you however, is to go through the figures.
- How much debt?
- Expected monthly contributions?
- Current Equity? (it'll be anyone's guess in five year's time)
(and that's just a starting point!)

Is it not possible to go interest only for the term of the IVA?

Charco_2

If you're with NR they will INSIST that you'll go Interest only (but that's not actually better for you!)

Firstly, with Interest Only there's no guarantee that the value of your house wont rise anyway, still meaning that you'll have equity to release.

Secondly, the money you save on Interest Only (as opposed to Capital Repayment) would be entered into the IVA as your monthly contributions anyway.

Remember, you're only going to have to realise/release up to about 85% of the value of your home. If you have little or no equity now, it's unlikely that your capital repayments are going to make up much more than 15% of the value of your home within five years. And even if they do, you're not going to have to release the whole 15%, just what ever is OVER that amount.

(If this is a bit muddled i can try again!)

needleofftherecord

Thanks guys - got a few figures to play with there so will get my calculator out! Also am feeling a bit pressured by IVA company - they keep ringing me to check if I have decided yet - does any one know if there is an expiry period from quote to decision? I am not happy to make any decision until I have had chance to think thru the long term implications

Charco_2

No there is no "expiry" period for a "quote" - it's not like they're giving the absolute best insurance deal available to man!

So don't listen to them if they try to put pressure on. You should only sign up when you feel completely comfortable that you are making an educated decision about one option over the others available.