Forced towards debt

[gav]

Not exactly IVA but could lead to it (and could'nt find a suitable legal forum)

A few years ago my partner & I puchased a house with the aid of a "loan" from a relative.

A few years down the line we discovered that this relative actually had a charge on the property which was proportional to the current market value of the property (approx two thirds) and so far has not let us take out a small secured loan on the property.

In my mind my partner and I must have a legal right to access the remaining third of the property equity .... is this right?

[MelanieGiles]

Hi Gay

Yes - you are correct in that you and your partner have a third share in the property, but what a strange set of circumstances! For your relative to have a charge over your property, you must have signed your consent for this. Was is always the intention to give them security for their loan?

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[ray_a]

Hi Gav

From what you have said it would appear that you are entitled to the 1/3rd but you need to see what the charge on the property actually states.

I think it will most probably difficult for you to use the equity for an IVA but when deciding whether to go into an IVA you would need to discuss this with the firm you choose to go into the IVA with.

Hope this helps.

Regards

Ray

[gav]

Hi Melanie ... that was quick

Errrrr no ... not exactly. Our Solicitor did not explain the conceqences at all and certain paperwork was kept from us by the relative (so they could take a copy !!!!)

Like I said we only discovered the 2nd charge when our fixed rate mortgage ended after 3 yrs and we went in to the motgage lender to review it.

This has led to us taking out quite large unsecured loans which we could pay off by using the equity in the house by taking out a secured loan over a longer term (& lower interest rates)

ps it's "gav" ......... not "gay"

Hi Ray

I am hoping that I will not need to enter into an IVA if I can access this equity

[MelanieGiles]

Oops - an unfortunate slip on my keyboard!

What is it that you would really like to do? Re-mortgage and pay off everyone? If so, you will need to get your relative's permission given the existence of the charge.

You could challenge the validity of the charge, but this would be costly in terms of legal fees, and I am guessing that there is not too much spare cash at the moment. What repayment terms did you agree with the relative, and are you still on amicable terms with them?

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[gav]

I have worked out how much of the property value the relative is ""entitled to"" and what we owe the mortgage lender and therefore how much equity is "ours". I was therefore thinking of securing a loan the value of which would be equal to or less than our share of the equity and paying off the unsecured loans which have high interest rates.

It is safe to say that we have seriously fallen out with this relative over this matter due to their reluctance to communicate about the matter .... they therefore have us by the b---s (so to speak) .... but can they legally stop us from getting to our share of the equity?

There is next to NO cash at the moment and a secured loan application can cost £100 which may be tunred down by the relative not signing the DoP

[MelanieGiles]

This will be a matter for the secured lender to consider, who may not be prepared to lend given the existence of your relative's interest.

Consolidating unsecured debts into a secured loan can be a sensible way forward, as interest rates are generally cheaper, but you do need to be disciplined about those credit cards, cut them up and not continue to use the accounts in the future.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[Storm]

One issue you will have is not many lenders want to sit 3rd in terms of security. They will want an explanation of the charges and also consent from the existing chrage holders.

Is the terms of your agreement that you can repay the relative a sum of money ? so that they can realise there investment ?

[gav]

If I can prove that I have a legal right to my share of the equity then I should be able to get the relative to sign a Deed of Postponement so that the sercured loan lender has 2nd charge

[Storm]

My thoughts were more to take them out completely ?? by realising the value today.... that way you could remortgage rather than try and find a lender who will do the secured loan.

[ray_a]

I think the answer here if I was faced with this problem would be to remortgage to clear my relative and clear as much unsecured borrowing as possible!

Talk to a financial adviser about how much you can borrow. Your difficult relative would most probably want his money back.

Failing that is it possible to sell and find somewhere else to buy?

Do agree about the credit cards and borrowing and please learn something from me. Credit is a financial cancer it just grows!

You can now get a very good Mastercard where you pay money into and you can use like a credit card and their site is :-

www.mycashplus.co.uk

It is very good and you only have a small monthly charge and a very small initial fee.

With your personal bank account please ask them to remove your large overdraft and perhaps just have a £250 limit on it.

But please promise us that you will cut up those nasty credit cards!

Regards

Ray