Moving house during in IVA - advised needed!

Lozza76

Hi All,

Have finally decided to do something about my debts and booked an appointment with the CAB next week. I'm 95% certain ill be going down the IVA route.

I do though have some concerns re moving house during the period while in an IVA!

We have a mortgage in our household of about 175k with about 10k equity. When we bought the house in 2008 I was lent 9k deposit from my parents and if house was sold, a would need to pay this back. I will need to move house sometime in the next 5 years due to having outgrown our house now we have 2 kids.
I realise the chances of me getting a mortgage will be zero, which leaves me with 2 choices - sell mine and rent or rent mine out and rent a bigger place!

If I sell mine and wanted to rent somewhere bigger, would I be able to under the terms of the iva? (Assuming my current mortgage payments were the same as the rent on a new place)
would I also be able to pay my parents back from any equity?

If we decided to rent ours out and rent somewhere bigger, would this be allowed assuming we didn't make any profit on renting ours out and that any new rent would be the same as our current mortgage payments?

Any advice would be greatly appreciated

Thanks

UpToMyNeckInIt

Hi Lozza,

You are definitely going to need to pose this question to your IP/debt management firm, and ideally move to this bigger house BEFORE committing to the IVA route.

Once in an IVA, the RX1 restriction may throw all sorts of spanners into the works if attempting to sell a property, and most letting agents/landlords will run a credit check on you (which you will almost certainly fail once the IVA is in place), which makes renting difficult as well.

On the basis of the equity alone, you will not be able to up-size by buying. That said, if there is any way you can keep the property, that should be looked at (I believe that property is still a good long-term investment).

If the IVA is in place, and you flog the place, you might be expected to release all of the proceeds to pay off your IVA. (I am assuming the loan from your parents is informal, and that they would have little say in laying claim to the first £9k of released equity).

If you decide that IVA is the way forward, you could (and technically should) include your parents as a creditor in the IVA. But then they get the same dividend as your other creditors. If you don't, they may have no legal right to anything. (You have my sympathy with that moral dilemma, I owe my folks £2K - and that's one debt I intend to repay in full).

Therefore, providing the rent covers the mortgage AND you get permission to let from your existing mortgage Co (or if you can arrange a buy-to-let mortgage), I suggest keeping the house as a long-term investment.

Don't worry about making a net rental profit, you want to in fact - that may be the thing that allows you to keep the house. It contributes towards your income, increasing your IVA payment accordingly. (I was able to keep an investment property on this principle).

If you find your existing firm unsympathetic (as CCCS/Stepchange were in my case), try some others (see reviews of IVA firms on www . iva . com).

Best of luck whatever you decide.