give up buy to let and keep my home (iva)

withoutahope

hi all,here goes........

split with my partner so now live alone in my own home worth 160,000 (mortgage 145,000/equity 15,000),also massive income drop due to short time at work,also got a flat in my name worth 115,000(mortgage 110,000/equity 5,000 at best),im 35,000 in debt (cc cards,loans)......flat is tenanted but losing £100 a month that i can no longer sustain,in total im overspending £600 a month with credit all but used up.....so im thinking of giving up flat and an iva for my loans......i know i can afford £250 a month towards the iva as well as my mortgage repayments.......the question is will the bank that holds the mortgage on the flat chase me for equity as they will have to sell it at a loss (20-30,000 is not uncommon), any advice is greatly needed and appreciated.......many thanks to all that contribute to this site.

Charco_2

It all makes sense except for the flat. Obviously you cannot afford it and you will need to sell but I wouldn't simply hand back the keys to the bank... could you not look into selling the flat yourself?

Eitherway if there is a shortfall in the sale of the flat, then it will just be an unsecured debt to you (just like the rest of the £35k of your debt). While it is mortgage is attached to the flat it is secured, when you sell the flat any shortfall will be unsecured!

This would then be included in your IVA.

As regards your own home (the one you're living in), at some stage during your IVA you will be expected to address the equity in this property for the benefit of your creditors... However, it doesn't really look like there would be any equity at this stage (which is a good thing i suppose)!

(even if £160k is a realistic price you could achieve for your home, you would not be forced to sell. However lenders are unwilling to lend more than 85% of the value of the home for mortgage purposes... infact 70% in this current climate is rare! so you multiply 160,000 x 0.85 = £136,000... so infact you've negative equity for the purposes of the IVA, which is fine because homes are for living in, so just live in it!)

It's worth drawing up an Income and Expenditure (or ringing a company who don't charge fees and going through one with them) to see how much realistically you have left over each month but as a starting point £250 would probably be a reasonably IVA... However until the I&E is done, you wont know if you can afford more or less than this figure!

withoutahope

Hi charco,the flat has been on the market for over 12 months now and no sign of it shifting,housing market is !!!!! at the moment as we all know,i completely didnt realise the shortfall would be unsecured so good news there,i totally agree in that i shouldnt just hand back the keys for them just to sell it at half price,so i think i will just price it for a quick sale,say 100,000 and that would mean i owe the mortgage company 10,000 of unsecured debt to be added to my personal debts,lets say my home doesnt increase in value to any significance and there is only say 20,000 in equity could they or any of my creditors force me to sell or release equity.......?
many thanks,much appreciated charco.