Help with understanding Full and Final?

[boychild]

Hi All,

We are 3 yrs into our IVA and have 30 months left (they made us extend it for a further 6 months not long into it as we had a baby and required a variation) After year 4 we are required to release around £5500 equity between our 2 IVA's. Our fixed rate mortage is up in Dec 2010 and we currently have a mortgage of £77,000 and our latest house valuation came in at £95,000-£100,000. Ideally we would like to offer a Full and Final settlement at that time, but dont know how to go about it, if we would be allowed to borrow almost 100% of our property value, and if our IP would be willing to accept it. Would we work out the value of the remaining payments and the equity we already need to release and offer that? Or do they want more for offering a full and final? I understand the IVA will remain on our credit rating and obviously our mortgage cost would be going up as a result but we just want to be out of the IVA. Also, I realise if we changed mortgage companies prior to coming out of our fixed rate we would face penalties, but would it not be worth trying to get out sooner rather than later if we could manage to release enough equity?

[boychild]

Sorry also do we have to release the equity then make the offer or can we make an offer based on a mortgage offer, then if the IP agrees we can go ahead and release the equity? And if they refuse the offer can we continue with payments as normal until the end as when we required a variation we were told if the variation was refused we wouldnt have been able to continue and would have had to go down the bankruptcy route, which after 3/4 yrs into it i wouldnt want to do.

[Pennyless]

Well done boychild for getting this far down the road. I am sure an expert will answer your question soon, however, I would imagine obtaining almost a 100% mortgage whilst still in an IVA or for sometime after will be difficult to say the least, especially in the current climate. If by luck you did manage to find one I would also add that the interest rate could be quite high, thus I doubt your creditors would force you into such a position.

Its also worth noting that you say your creditors expected you to release X amount equity toward the IVA at the end, which I would say was quite ambitious by them considering the recent fall in house prices over the past 18 months.

In addition as far as I am aware between the 4th and 5th final year you are expected to obtain or investigate the possibility of a new mortgage to release a certain portion of equity but your mortgage payments cannot be in excess of your "original" mortgage costs at outset of the IVA PLUS 50% of your IVA payments.

If you cannot release the £5000 at the end of the final year I would assume that they would simply extend the IVA for an extra year to recoup the agreed £5000 or at least part of it, which is reasonable.

[Skippy]

That's a excellent answer from Pennyless, and I can't add anything to it apart from recommend that if you are looking to remortgage that you have a word with Tony Parsons who posts as Welshboy on the forum. His contact details are in the experts section at the side of the page.

I'm sure one of the experts will be along soon to answer the rest of your questions.

[Pennyless]

Thanks Skippy...on a fast and very sharp learning curve here:-)

[Skippy]

You're doing well and picking it up a lot quicker than me!

[MelanieGiles]

It will be impossible to raise a 100% mortgage whilst in an IVA, I am afraid, and given the figures you have quoted, it is unlikely that you will be able to raise any money by way of remortgage whilst the IVA is on your record.

[boychild]

Thanks for your replies.

Ok, so Full and Final not looking too good, but what about the £5500 we have to release as part of the agreement? Do you think we wont even be able to release that? As our agreement states we must release it by means of remortgage in Year 4. Bankruptcy just isnt an option for us, I would be devasted to have paid in for 4 years to find we cant release the equity needed. Hopefully by Dec 2010 the recession will have eased, although I dont believe its going to be easy to get a remortgage anyway in our position.

[Pennyless]

Boychild as Melanie said you will find it impossible to raise such funds and also remember that each check with each provider could add more and more bad marks to your actual "Credit Rating". I realise this matters little at the moment whilst in an IVA but after a couple of adverse checks I would imagine your chances of success will diminish with each attempt.

Good luck.

PS: As they say "Shy bairns get no sweets".

[boychild]

But if they new it would be impossible to release such equity why would they state that we MUST release £5500 by remortgage? Sorry im just a little confused, and worried, that we could get refused a remortgage to release the funds needed and get made bankrupt after 4 years of very hard work and alot of money to go down the pan. I thought it was common for people to release equity in the final year as part of the agreement?

[Skippy]

If you are unable to release the money in the final year I think your IP can call a variation meeting to ask creditors to conclude the IVA without the equity release, or to allow you to make a an extra year's payment into the IVA.

[boychild]

Thanks for that Skippy, you have calmed me! I know its over a year away yet but still cant help but worry.

[Skippy]

No one is going to want to see your IVA fail at that late stage, and I'm sure that if you have any problems your IP will be able to sort them out with your creditors x

[Shining]

I think as the IVA does come nearer to the end you do start to think of the 4th year equity release as I'm only 20 almost 21! months in and already think about it, what will happen if this or that? I wish I stopped worrying about things really.