IVA support and discussion thread

longtermplanner

hootsiebootsie wrote: »

i dont want to be asking iva adviser again

I know it's more convenient to be able to ask questions here, but you really do need to feel that your IVA advisor is interested enough in your case to answer ALL your questions. If you don't want to bother them by phone, email them in and you will get a reply when convenient.

Second question: hmrc and a supplier from liquidated company are main creditors, we dispute the amounts due, can we still complain and appeal and if succesful would this lead to a downward revision of amount repayable under iva?

I don't know if your IVA proposal will involve acknowledging that you do owe the debts. Ask your IVA advisor.

BUT your IVA payments would not be reduced even if your debts were less as they are set at what you can afford to repay rather than a % of your debts. If that means you repay 80% of your debts rather than 18%, that doesn't make a difference.

If you have good grounds for disputing these debts and they are the largest ones, then you should IMO put the IVA idea on hold and challenge the debts. Because that could really change your whole financial situation.

emmapieland

I ave read the comments on the thread and have come on here as my husband is in the process of getting an IVA because of £30,000 debts on credit cards. I got a letter from Step Change today asking me to sign something to say I am happy with the IVA to go ahead as we own a house together. We have been here for 6 years, the house is worth £140,000 and our remaining mortgage on it is around £118,000. I was fine with him going ahead with the IVA as trying to make the payments was making him ill.

Having read the information that came with the letter they have asked me to sign, I went to a CAB for advice. They couldn't really help and just read me pages from their website so I thought I would have a look here.

I should point out that all of the debts are in my husband's name - we only have the mortgage together which we have always paid.

My main concerns are:
_ in 3 years time my son will start school so I will go up to full time, meaning my wage will rise by £10,000 - would the creditors be able to take any of this?

- I don't understand the equity release thing. I am guessing that in 5 years time, when the IVA ends, our house will be worth more than it is now. After paying 5 years of £250 a month (the amount he has been told he will have to pay with his IVA), will we then have to release the equity in the house and give it all to the creditors?

If this is the case then are there any better solutions - a DMP?

Thank you in anticipation

Worried.

hootsiebootsie

Thanks for the replies. I have spoken to 3 and found one iva i am comfortable with. Not sure what to do now, but having spoken to citizens advice they reckon we are between a rock and hard place but iva at least lets my husband continue working.

UpToMyNeckInIt

emmapieland wrote: »

I ave read the comments on the thread and have come on here as my husband is in the process of getting an IVA because of £30,000 debts on credit cards. I got a letter from Step Change today asking me to sign something to say I am happy with the IVA to go ahead as we own a house together. We have been here for 6 years, the house is worth £140,000 and our remaining mortgage on it is around £118,000. I was fine with him going ahead with the IVA as trying to make the payments was making him ill.

Having read the information that came with the letter they have asked me to sign, I went to a CAB for advice. They couldn't really help and just read me pages from their website so I thought I would have a look here.

I should point out that all of the debts are in my husband's name - we only have the mortgage together which we have always paid.

My main concerns are:
_ in 3 years time my son will start school so I will go up to full time, meaning my wage will rise by £10,000 - would the creditors be able to take any of this?

- I don't understand the equity release thing. I am guessing that in 5 years time, when the IVA ends, our house will be worth more than it is now. After paying 5 years of £250 a month (the amount he has been told he will have to pay with his IVA), will we then have to release the equity in the house and give it all to the creditors?

If this is the case then are there any better solutions - a DMP?

Thank you in anticipation

Worried.

To answer your question, you will be required to ATTEMPT torelease equity up to 85%LTV via remortgage or secured loan (you are hovering aroundthat point right now). Subject to affordability criteria, one of which is thatthe additional loan/remortgage repayment comes to no more than 50% of your current IVA repayment, with any remaining IVA repayments reduced by the same amount.

Other usual criteria apply, such as the amount of the remortgage in relation to multiples of household income. So if your existing mortgage is already say 4x your household income, you are unlikely to be lent any more.

BUT in your case, half of the equity is protected because it is only your husband’s half which is at risk, as only he is in the IVA.

How much do you reckon your house will be worth on month 54?

If we assume for the sake of example that it is £175,000. 85% of that is £148,750.

Less your existing £118K mortgage, leaves £30,750. Divide that by 2, and the amount that you (your husband) will have to ATTEMPT to release is £15,400.

If (and it is a big ‘if’) your husband is successful in his remortgage/loan application, then this £15,400 goes into the IVA. (Let’s assume as well that it is a c13-Year loan at c£125pcm).

That means your WORST CASE scenario, your debt will be repaid in 18-Years time (less if you increase your loan repayment after the IVA payments finish), although your credit file will have recovered after Year 6.

There is still a fair chance however that you will not qualify for a remortgage/loan, so your IVA merely lasts a total of 6-Years.

Vs

A DMP for £30K at 250pcm. Should last around 10 Years (assuming the BEST CASE but unrealistic scenario, that ALL of your creditors won’t want a bean in interest over that duration). Furthermore, your credit rating is trashed for that 10 Years, plus another 6 after your final DMP payment.

What you have to decide is: What is the risk of loan/mortgage criteria being relaxed by the time you have to attempt equity release? As well as: Can you live with a trashed credit rating for 16 Years if you go for the DMP?

In relation to your income: You are not bound by the IVA as your husband will be, but his IP will want to know about your income to calculate what your fair contribution towards the household expenses should be.

You and your Husband have some thinking to do.

Good luck.

emmapieland

Thanks for the reply UMNII. Is it unlikely that my husband would be able to remortgage? Am I worrying about something that isn't likely to happen? Is the most common situation that his IVA would be extended for another year? I know you don't have a crystal ball but I am just wondering what usually happens.

Another thing, if we did have to release the equity and give it to the creditors, what is stopping us from moving to an interest only mortgage now so that we won't have to pay back as much equity in the house at the end of the 5 years? Just an idea.

Free_Bird

At present the feedback from iva customers attempting equity release is that they cannot get a mortgage offer, so the iva goes on for a 6th year instead.

As you say though, nobody has a crystal ball. But We need to be mindful of the housing market picking up, and the apparent improvement in the economy. It follows, because history tends to repeat itself, that banks will soon get bullish, and start sub-prime lending again at some point.


Just when of course, is anyone's guess.

Yes, good idea to switch to interest only, so that you don't accumulate equity during the iva. Saying that, doing this, will make you better off each month so presumably your iva repayment increases, or you could shorten the duration of a dmp.

longtermplanner

emmapieland wrote: »

what is stopping us from moving to an interest only mortgage now so that we won't have to pay back as much equity in the house at the end of the 5 years? Just an idea.

What will stop this is the fact that it is now extremely difficult to be able to switch to an I/O mortgage unless you have already have stacks of equity. It isn't going to happen.

UpToMyNeckInIt

...Very good points FreeBird and LTP.

In SE England, our house prices are rising at around 6% a Year, so anyone entering an IVA now, must attempt to second-guess the housing market in their area (easier said than done I know), to assess their 'risk' of being made to release equity.

The scenario that emmapieland describes, means that a DMP is also worthy of serious consideration.

Personally I think, if you can do a DMP in say 7-9 Years, then it starts to look like a very good option, if you believe that equity release will otherwise become more probable over the next few years, for IVA customers).

scared-sick

UpToMyNeckInIt wrote: »

...Very good points FreeBird and LTP.

In SE England, our house prices are rising at around 6% a Year, so anyone entering an IVA now, must attempt to second-guess the housing market in their area (easier said than done I know), to assess their 'risk' of being made to release equity.

The scenario that emmapieland describes, means that a DMP is also worthy of serious consideration.

Personally I think, if you can do a DMP in say 7-9 Years, then it starts to look like a very good option, if you believe that equity release will otherwise become more probable over the next few years, for IVA customers).

Do you think there is an actual figure that the mortgage company would give you equity release for?
Do you think it would only be for large amounts of equity or small amounts too?

Also if one of my biggest creditors was also my mortgage provider do you think they will be more likely to reject my iva application?
Would the mortgage company be more likely to allow an equity release as it would be in their interest to do so being a main creditor?

milliemonster

in an iva they will disregard equity below 5k, anything above that which doesnt take you above 85% ltv they will want.

having your main creditor as your mortgage provider will not affect your chances of them accepting or rejecting your IVA, they are totally separate departments and its not actually your creditor that does the voting anyway, its their representatives.

Approving an equity release is done purely as a commercial decision if you fit the criteria, it has nothing to do with whether they are a main creditor or not.