Negative Equity Advice - IVA?

blckdog

My wife & I have had a house on interest only mortgage for about 8 years. The mortgage is £180k the value approx £130k. I also have £10,900 owed to HMRC in tax and am self employed. They aren't actively pursuing it but are likely to soon and I want it paid off. I may pay that on a 0% card if I can.

We have no other debts and have a perfect credit score (999). We recently spoke to a debt advice company and they suggested doing an IVA, but I'm not convinced it's a good idea. I'm 35 and don't want to be tied in for 5 years before we start again.

We can't remortgage due to the neg equity. I'm the sole income as we've two kids (8 and 6 years old), although my wife is probably going to start work again in the next year or two.

We're in N. Ireland and the houses here aren't recovering quickly. We would really love to move, but feel totally trapped. We've done everything we can to minimise outgoings and remove any other debts, including paying off over £20K worth of credit card debt.

HELP

sourcrates

Hi,
An IVA for what, the HMRC. Debt ? Or the mortgage ?

An IVA can be used to help pay off many common debts, including overdrafts, personal loans, credit and store cards, catalogue and hire purchase, mortgage shortfalls, Council Tax arrears and money owed to HM Revenue & Customs.

However, you can’t use an IVA to pay off, for example, your mortgage and other debts secured on your home, some rent arrears, certain types of car finance, magistrates’ court fines, maintenance, Child Support arrears or student loans. Check with a debt advice agency what else might be excluded or included.

Normally you have to have over 15k of debt for an IVA to be concidered, although there is no actual lower limit.

Why is your mortgage so Hugh ? Have you consolidated previous debt on it ?
I can't see why you would want to do an IVA ?

If/when HMRC do chase up the debt, you simply agree a re-payment plan with them, or the DCA, if it's got that far.

blckdog

Why is it so high? - we bought at the absolute height of the boom in 2007. NI prices were off the chart at that time, so we paid £210k with a £30k deposit. Our first house we bought 2 years previously for £72 sold for £140k.

I was considering an IVA for the HMRC debt AND the mortgage shortfall. It would mean selling the house to crystalise the debt.

sourcrates

Right, ok, gotcha now.

Yes, that could be feasible, but you would first need to work out how to go about this, as debts from mortgage shortfalls are usually accrued after a house is repossessed, or sold, the fact you would be in debt to your mortgage lender, may mean further borrowing would be impossible.
Some lenders do negative equity mortgages, I would talk to your lender before I committed to anything.

Unless you intended to rent, in which case you would have one less obstacle to overcome.

tlc678910

Hello, if you don't want to live in your house anymore could you ask your mortgage lender for permission to rent it out?

Now that your children are in school could your wife make returning to work a priority? If she had a demanding career that she is apprehensive about returning to with a family she could try something new working nights, weekends or during the school day (obviously you haven't stated if she or your children have any health issues complicating this). My job is 10pm to 7am (3 days a week) which works well for my family with my husband at home overnight. We just use after school care a couple of days a week so I can get a decent sleep - these sorts of hours are pretty common in the care industry.

If your wife starts earning it would ease your household finances whether you deciding to stay in your house or rent it out but need to subsidise it.

If you do decide to try to put HMRC on a 0% credit card I would consider splitting it across a couple of cards unless you are a super high earner with super high credit limits as applying for a balance that high might scare them off. I would also make sure you have a couple of cards you spend on/pay off as even existing cards will send you balance transfer offers and you will have a few cards for a credit card shuffle. Perhaps you already have credit cards? I gather applying for a few in a short space of time damages your credit rating. I don't know if HMRC entertain payment plans??

Good luck

Spidernick

I've never heard of an IVA, but agree with post number 5 re renting your house out. That's what I did in the early 90s when I was in negative equity.

Just out of interest: you made a £68K profit with your first house, so presumably had at least that amount as capital, and probably more, so why did you only put a £30K deposit on your current house?

Pixie5740

Does the debt advice company you spoke with charge for advice or other service by any chance? If so I'd take what they say with a large pinch of salt and contact Step Change, CAP UK or PayPlan to go through your options.

Do you have any repayment vehicle in place to pay the mortgage capital and the end of the mortgage term?

Also you can stop wasting money paying for pointless credit scores. You don't have a universal credit rating and the CRAs don't lend money so their score is irrelevant.

DandelionPatrol

blckdog wrote: »

Why is it so high? - we bought at the absolute height of the boom in 2007. NI prices were off the chart at that time, so we paid £210k with a £30k deposit. Our first house we bought 2 years previously for £72 sold for £140k.

I was considering an IVA for the HMRC debt AND the mortgage shortfall. It would mean selling the house to crystalise the debt.

So you had an equity gain of 68 on your first house and only put 30 into your new house. You took out 38 of equity and you have blown that to the point that you cannot pay 11 to HMRC. Hmm.

blckdog

The profit made from the first house sale was 10 years ago and most was ploughed in to fixing up this house. Also I started my business in that time which is now going well, but the start was rough.

Having evaluated everything we've decided the IVA isn't the right choice. It's going to be too destructive and will take a long time to recover from.

The plan is this - If my wife can find suitable work then we'll plough all that money into the outstanding debt and see if we can get back into a better situation. If we can add £10K to our annual income, that will pay the debt then start to pour more into the mortgage. It will take about 3 years from the point she gets a job, but it's still better than any other alternatives.

Thanks for your advice everyone.