Am I the only one that doesn't see the issue!?!

dapast

I don't get all the people complaining about needing to remortgage there house or get a secured loan to release the equity in their house.

The other option is sell the house and pay back what you need to pay back and keep anything that may be left, it's getting right on my nerves that people enter an IVA and expect to be allowed to write off X amount 1000s in debt, but be allowed to exit the other end with X amount of 1000s in equity, if the money was cash savings you would need to introduce it to the iva, why should property be any different? ?

I've been in an iva and come out the other side but would never expect to come out better off, or is it just me??

Moan over!

Anyone else have a view?

longtermplanner

I don't think people are complaining about the need to remortgage.

But being asked to take a secured loan at 15%, 20% or more? They never expected that when they agreed to the IVA, they thought the IVA would solve their debt problems, not land them with a prolonged nightmare.

Yes selling the house could be an option, I agree. But many people will have been "sold" an IVA on the basis that it protects their property.

dapast

I guess, i'm just not sure I agree with being able to "protect" assets if you owe more than you can afford to pay. Now I don't agree with secured loans at 15 or 20% but if you have sizable equity I do believe you should have to introduce it to the iva, whether through loan or remortgage or sell the property, because if you didn't own a house, and was in an iva you wouldn't be allowed to save the equivalent in cash.

UpToMyNeckInIt

dapast,

I agree to a point. After all, what is wrong with your creditors seeking to get back all that the customer can afford to repay? Nothing in principle, and that is what an IVA is all about, whilst allowing people to protect their home(s).

But hey, everyone who subscribes to MSE, wants to to what is best for them. So I do not agree with your stance on effectively requiring IVA-ers to sell-up. For starters, many customers may have negative/little equity from the outset, so they presumably go BR instead, and the creditors get even less back.

Then there are the 'fortunate' homeowners like me (and trust me, I class myself as very fortunate in the grand scheme of what I read on these forums), who are asset rich and cash poor. Do you not think that I attempted to repay my spiralling debt by releasing equity? Of course I did. I had £45K equity in my 2 properties against my £35K debt at the start of my IVA 2-Years ago.

You can read about my circumstances here: https://forums.moneysavingexpert.com/discussion/4778005

But multiples of income limit what you can borrow, (as well as mortgage LTV's). Two Years in, with the rising property prices here in the South-East, my equity stands at £125-£150K (conservative estimate). I'm sure it will be more come equity release time at Month 54 of my IVA.

Despite the equity, I probably will not be able to release any, because our household income is c£38Kp/a, (albeit with our property currently appreciating per year, more than what my Wife and I earn). But against at £393K mortgage over both properties. So with a mortgage debt roughly 10x what we earn (on paper), I ask you: Who is going to give me any more secured borrowing? Answer: Nobody.

Now, whilst everyone has their own unique circumstances, to my mind, many of the people complaining about equity release fall into 4 main groups, either:

1). feign ignorance of their IVA terms;
2). have signed up to older, draconian IVA protocols which REQUIRE equity release, by sale of the property if necessary;
3) Have stacks of equity / affordability; and/or
4). Those that 'assumed' that a 12-Month extension was a mere formality.

You could take the view that those falling into group 1 above were with hindsight, a bit silly: Would you sign up to something as life-changing as an IVA, without forensically reading its terms? - No? me neither. But equally, desperate people have a tendency to panic, and the IVA industry is riddled with issues of hard-selling and/or mis-selling. Combine the two, and hence the problem.

I feel for those in group 2. They are unlucky: Most IVA companies varied the equity release provision to include the term 'attempt to release equity', once it became apparent that only a very tiny percentage of IVA customers would be able to remortgage. Some of these customers seem to be the ones being offered 'secured loans' as an alternative. Not strictly within their IVA terms I agree, but preferable to selling up.

Then there are the group 3's. Whilst I have less sympathy with this group, you must appreciate that the IVA firms are very good at playing down equity release (with some justification in many cases, as it is nigh-on impossible). The main complaint seems to be that customers have fulfilled their end of the contract by seeking REMORTGAGE (remember these are all pre 2014 protocol), and failed. Some of these are falling victim to the IVA company (typically DFD) attempting to saddle them with a secured loan instead - something falling outside the IVA contract terms.

A contract is a contract as far as I'm concerned, and whilst I sympathise less with group 3, why should they have to accept terms outside of contract? They should not have to. Would you? No? Thought not.

The Group 4's are just foolish, assuming they would be lucky. Well, if your equity goes up substantially over the IVA term AND you have a significant rise in household income, then you cannot be surprised if you can, quite reasonably, afford to release some equity - remortgage or secured loan.

Interest rates. and yes I agree with LTP, they are extortionate. But there is an irony here, think about it: The higher the APR, the LESS you have to release, because the repayment is based on total monthly affordability, which includes the interest component (50% of your current IVA payment etc). So those customers being offered these products need to bear in mind that, if APR's were lower, they would have to release more equity, and more customers would get caught. (Example: If you are deemed to be able to afford £250pcm, what can you borrow at 20%APR? ...a darn sight less than if the APR on the loan was only say 6-7%APR).

this is significant because, once your credit file recovers in year 6, and you presumably then seek to swap this debt to a cheaper APR secured 'consolidation' loan.

dapast

Up to my neck unit
I never thought of not being able to remortgage due to income, and I don't agree with secured loans as an option of equity release, I think it is wholly immoral to Force someone who has obviously a bad time/been irresponsible with credit, to take out a hugh loan, secured against their property. But I still stand by my opinion that if people with a lump of equity in their property should either remortgage or sell, I had an iva, I have no property and going bankrupt would of been a lot cheaper, but
1 I didn't want the stigma of going bankrupt, and
2 I saw an iva as a way of paying back more of what I owed.

I don't feel anyone who owes money has the right to protect particular items such as property's.

You stay your in an iva, but own 2 properties, surly selling 1 of them would help or are they both negative equity? ?

althas

Tough one this

I can (almost) see both sides of the argument, but I am a kind of black and white guy. If you have equity in a house greater than your debts then why should you be able to "write those debts off" in an IVA when you can sell the house and repay enerything. If I had £45k is a savings account or in shares etc, would I be allowed to keep them and enter an IVA? I think not

I have not owned a car for 5 years as I sold it to repay some of my debt. That was all I had and owned worth anything. After all, at the end of the day, no one forced me to take credit, it was my own stupidity and blindess to my own situation

This, for me, lies with things like people who get an allowance in their budget for cigarettes. Things like that should not be allowed at all. The idea is you should be doing all you can to repay as much as you can of the debt YOU took out and things like cigarettes are your choice to smoke. There is enough free services out there to help you quit (and yes I used to smoke before you say Do you know how hard it is). If you want to smoke, the money comes from somewhere else in your budget

I know how hard it is in an IVA, I know the pressure and stress it causes so I am sorry if this agrivates anyone, but all should be fair and a house should be seen for what it is at the end of the day, an asset

UpToMyNeckInIt

...No, a house should be seen for what it is: YOUR HOME. (...and being self-employed, the second property is my pension).

Maybe what should happen is that a charge for the total remaining debt is placed on the property, which could be repayed only once the property is sold, maybe with the option to equity release once the debtor's financial position improves. Unfortunately, banks are greedy and would probably add compound interest to it all etc.

I appreciate that everyone here will have differing opinions on the subject, and I do understand where althas and dapast are coming from.

...and it is fair to say that getting into debt was 90% my fault. What did it for me was, just as I was starting to get a handle on things, MBNA, realising that they had me by the balls, ramped up the APR on a credit card with £14k on it, from a manageable 12% apr to a staggering 35%apr. Suddenly, the interest charged each Month exceeded the minimum repayment.

...So IMO 10% of the blame lies with my creditors for getting greedy.

Fast forward 2-Years: I now have 4x the amount of equity now, than at the start of my IVA. I expect to have a considerable amount more by Month 54. As it goes therefore, I am quite happy to use some of it to repay my debts and pay the IVA fees in full, as I am still left with a big chunk left over. That is quite fair IMO.

Personally, I would rather secure a loan, than sell up (and even a sub-prime loan is waaay cheaper than a sub-prime remortgage).

So again, if the banks etc. were not so greedy wanting to charge stupid-%APR's for IVA-ers wanting a secured loan/remortgage, they would get more back.

But althas, your point about 'assets exceeding the debt' is interesting. Got told by Stepchange (think they were still CCCS back then), that I would not be eligible for an IVA for EXACTLY that reason.

...Thank goodness I didn't take their advice, doing so would probably have cost tens-of-thousands of pounds in the long run.

Had I taken your suggestion, sold both properties, I might just about have been able to cover my debt after moving costs etc. But then what? Rent right?

In an appreciating housing market, prices in SE England are going nuts. (My family live in a '50's 3-Bed semi, and the rental is a '80's 1-bed flat - not flash places by any means). This has a knock-on effect with rental prices spiralling as well. So renting an equivalent 3-bed would leave me £700 pcm worse of than the interest only mortgage, not to mention the lost £3,500 p/a rental profit).

I think it safe to assume that had that happened, I would end up going BR further down the line.

Bottom line is that the IVA does allow me to repay more than any other sensible option. (EIF have found a couple of mis-sold PPI's as well, which I knew nothing about, both are going into the pot).

Me going BR would have seen my creditors get hardly anything.

biscuit1_2

To be honest the point of an iva is to recoup as much as is possible but is more an excercise in money management for the future, and one that i would say works, i dont know the figures but i would say there arnt to many that get "caught out" a second time after being through one.

Nargleblast

When you sign up to an IVA with an equity release clause you have no way of knowing what the economic situation is going to be four and a half years into the future. With us, we had equity in our house in month 54, but were unable to find any lender prepared to lend money to us, so the financial adviser we consulted provided us with a letter stating this which we copied to our IP. It was agreed that we could extend our IVA for a further year instead. This means that after our IVA payment on 1st August we will have just 12 more payments to go - it's been a long road, and not an easy one, but there is at last light at the end of the tunnel.

Sazzie23

Nargleblast wrote: »

When you sign up to an IVA with an equity release clause you have no way of knowing what the economic situation is going to be four and a half years into the future. With us, we had equity in our house in month 54, but were unable to find any lender prepared to lend money to us, so the financial adviser we consulted provided us with a letter stating this which we copied to our IP. It was agreed that we could extend our IVA for a further year instead. This means that after our IVA payment on 1st August we will have just 12 more payments to go - it's been a long road, and not an easy one, but there is at last light at the end of the tunnel.

Great news Nargle , you can start a count down.

Back to topic,

Remortgaging is a unknown quantity for lots of reasons, even renting with poor credit is fraught with problems and unless you are going to release enough to pay debts and costs of move then it's pointless.
I can see the OPs point that someone people are going to be better off because they didn't sell which is harsh on those that did, but if renting is going to be more expensive than the mortgage, then the creditors payback may end up not much different.