IVA: Crazy idea!

adeytecnic

Hi all


I had a crazy idea this morning! I would like to know if what I'm proposing is possible and if it would be financial suicide or not?

A bit of background...
My wife and I have been in an IVA since Oct 2010. A year ago we had our second child so had to take a six month break from the IVA while she was on Mat leave. We decided to both go back to work part time and myself term time only. This set up is great as we don't have to pay for any child care. Our IP has lowered our monthly amount back to the original amount of £285. We are just managing to pay this on our PT wages but things are tighter than ever!
The other problem we now face (aside from having no money after paying our bills) is that we are a family of four living in a two bedroom house. So our five and a half year old girl is sharing with our one year old boy. Not a massive problem ATM but I feel a responsibility to try and resolve this before they get much older.

My crazy idea is to sell our house valued at £135,000 and pay off the £110,000 mortgage. Then, use the equity to make a full and final settlement. We could then rent a three bedroom house for circa £650 pcm. This option if possible would give us the bigger house we need and a bit more cash each month. Also we would get debt free sooner therefore able to get a good credit rating and get back on the ladder later on.
I know stepping off the ladder is normally a bad move but in our situation we have no other option other than bankruptcy. Besides we only have a Northern Rock together 35 year interest only mortgage which we have been paying for seven years (£436.00 pcm)
We are lucky enough to have some equity in our property only because I have extended it and done the work myself.
Any suggestions or advice would be gratefully received
Thanks
Adrian

madharrier

Your idea sounds sensible to me. Rents have not gone up the same way as mortgages. If your mortgage is at a flexible interest rate it could kill your finances as soon as rates go up. You can hop back onto the housing ladder once this bubble has burst.

harveybobbles

What is the outstanding ballance on the IVA?

adeytecnic

I was told by my IP £9000.00 aprox

The other thing not to complicate matters! I am awaiting PPI claims that I am told in some cases can be used as a full and final especially when circumstances have changed.

adeytecnic

Just to add our IVA was set up with an extra year due to NR demanding that. Then as mentioned we took a six month break + in year four we will have to try and re-mortgage which we wont be able to. Therefore an additional year will be added so we would be looking at an end date of April 2018! Then we could be looking at a year to get clear and move house.

harveybobbles

Some IVA's insist that there is some sort of attatchment to a property ie the IVA is set at 5 years, but after 4 years they make you release money from your house.

The above is NOT concrete, just something I read in 2007.

[Deleted User]

If you're on an IVA, don't bank on your credit rating improving anytime soon.

Tixy

Sounds like it is definitely an option to explore.

Is your current mortgage and IVA payment combined higher than what you could rent somewhere?

If your IP thinks has indicated that a F&F is likely possible for the amount of money you will have available from your equity.

Don't forget you will need to factor in moving costs from the equity and quite possibly 6months rent up front for a rental (due to the IVA) as well as a deposit.

In terms of the PPI - I guess it could be worth waiting until this is resolved, are you claiming back the PPI yourself or is it being done by your IP?

Anondebtadvisor

You may find that your IP will want all the equity to go into your IVA so make sure you do speak with them before you sell the property. There will be a restriction which the IP will need to remove prior to the sale taking place.

I suggest that you also consider your bond and upfront rental of a few months so you can move into a bigger property and settle your IVA.

adeytecnic

Tixy wrote: »

Is your current mortgage and IVA payment combined higher than what you could rent somewhere?

The mortgage and IVA total £721.60pcm and I could rent a lager property in my area for £600.00pcm upwards

adeytecnic

Anondebtadvisor wrote: »

You may find that your IP will want all the equity to go into your IVA so make sure you do speak with them before you sell the property. There will be a restriction which the IP will need to remove prior to the sale taking place.

I suggest that you also consider your bond and upfront rental of a few months so you can move into a bigger property and settle your IVA.

I spoke to my IP today. They say there is no problem if we want to selling our house, but if we did we would have to pay a percentage of the equity into the IVA. They worked out the percentage of this, in quite a complicated way. I wont repeat the details right now. But basically out of our £25000.00 equity we would have to pay £2300.00 each! I was pleasantly surprised. However this still would not help us all that much, because we would still need to carry on paying the £285pcm.
They said to wait for the PPI claim to be settled, then find out how much we could offer for a 'full and final' before potentially selling the property. Basing the 'full and final' on PPI coming in, our circumstances changing and it being in everyone's best interests to complete early.