Quick question regarding IVA

Beakie181004

Hi
My debts are £50K...credit cards, loans, overdrafts.
I have £110K (equity) in my home
Income is £3700....outgoing is £4800. I overspend by £1100 each month. My loans/credit cards cost me £1500 of money each month. Will I be able to get an IVA considering I have so much equity in my house ?

Anondebtadvisor

Is your home solely or jointly owned?

Beakie181004

Hi,

When I say MY DEBTS, its is me and my partner and we own the house together

Thanks

Foxy-Stoat_3

Unless your house value is £1,000,000 then you will end up paying your IVA for another year if its accepted, or be forced to withdraw the equity and make your IVA pointless.

You should speak to one of the debt advisors about your situation as they will have more of an idea if an IVA is best for you.

longtermplanner

An IVA is very unlikely to be accepted, and if it was, you would have to make large IVA payments for 5 years and then remortgage anyway.

So I suggest you look at remortgaging now. And if you do, close down all except one credit card and pay that off in full each month, otherwise you will be back here in a few years again but with less equity to solve you debt problem.

Foxy-Stoat_3

longtermplanner wrote: »

An IVA is very unlikely to be accepted, and if it was, you would have to make large IVA payments for 5 years and then remortgage anyway.

So I suggest you look at remortgaging now. And if you do, close down all except one credit card and pay that off in full each month, otherwise you will be back here in a few years again but with less equity to solve you debt problem.

True that !

Anondebtadvisor

You might be using the market value of your property to establish equity but in an IVA they would use a forced sale valuation which would bring the equity figure down quite a bit.

If your IVA was protocol compliant you would be expected to attempt to remortgage or obtain a secured loan of upto 85% Loan to value - if this is not an option that an 12 month extension to your IVA

Beakie181004

Thanks everyone.

My ideal situation would be remortage. I'm old fashioned. We got into the debt. We pay it back

However we would not get a remortgage option as we have so much debt. If no debt, I'm confident I'd get £40K out of the house with our current lender, therefore able to pay off the majority of the debt. I'd then be able to have evenly matched incomings and outgoings. Ideal world

However, I have the debt, so no remortage.

So catch 22

Any ideas ?

UpToMyNeckInIt

...Instead of a remortgage, have you looked at keeping your existing one, and getting a secured 'consolidation' loan?

I to have equity in my property, but nobody would lend to me, because I had already over-extended my credit. I suspect you may also be in a similar situation.

I understand the point about wanting to avoid an IVA, insolvency, and with the prospect of equity release etc. But what other realistic options do you have?

That was the dilemma facing me 18 Months ago. I was repaying £700pcm towards my ever-spiraling debt of c£36K, and was also advised that an IVA would not be suitable because I had too many assets, and earn't too much (courtesy of Stepchange, who wanted to sell me a 20-Year DMP instead).

Didn't fancy that, and I had no trouble arranging an IVA, which is much more affordable, at less than £300pcm.

Compared to if I had gone the DMP route, I reckon I'll save well over £20K in the IVA, which would have otherwise been lost on interest/debt repayment.

Before fretting too much about the equity release clause, we must remember that it is subject to affordability criteria - ie: max. 50% of your IVA repayment - with any remaining IVA repayments reduced by the same amount, up to 85%LTV (based on a forced sale valuation). Other factors in this will be the multiples of income your existing mortgage is, relative to your income (approx. 7x in my case - so nobody will lend me a secured bean more).

Also my mortgage is in joint names with my Wife, therefore half of any equity is hers, so only half my 85%LTV at risk (only I have the IVA - I had the vast majority of the debt as well). So if you want to explore the IVA option further, try to put all of the debt in your name only, avoiding an 'interlocking' IVA, and halving the risk to your property equity.

All the best, whatever you decide.

Beakie181004

Thank you Up2MyNeckInIt.

Think I will contact Step Change and see what they advise.....all very scarey, whichever way you look at it :-(