I know I know, how does it work!

[yahwob]

Hi,

I know this question has been asked loads of times but I still cant get my head around it. I'm on the verge of applying for an IVA with debts of 30K. I currently have approx 50k in equity in the house but that is under a joint mortgage with my brother so in reality the equity should be shared 50/50.

So I take out the IVA and in year 4 they say right we want some cash from your equity, how much would they want and how would my brothers half of the total equity available be taken into account? bearing in mind my brother has nothing to do with my debts.

Thanks guys

[kallis3]

Hi yahwob and welcome.

I don't think your brothers equity will be taken into account at all as he has nothing to do with your debts.

One of the technical experts will be along to advise further.

[MelanieGiles]

Hi there and a warm welcome to the forum

Don't worry about asking the same question over and over again - as it relates to your property it is important that you understand what will happen to this in the IVA.

Your share of the equity is therefore £25k and you have debts of only £30k. I am assuming that you are going to be proposing an IVA where you pay contributions over a five year period, and in the final year creditors will require you and your brother to effect a remortgage based upon a maximum 85% loan to value - and you will be required to pay into your IVA your share.

As an example, if your house is worth £120,000 and you have a mortgage of £70,000 - you would be required to raise 85% of the £120,000 - hence £102,000, and then having deducted the original mortgage of £70,000 this would leave you with a share of £16,000 - ie half of the £32k which potentially could be raised - so in reality you would probably remortgage to £86,000.

Hope this explanation helps, and of course you will need to get your brother's agreement to this in advance.

If you have not yet contacted an IP firm, it might be a good idea to do so now so that you can set your mind at rest with regard to the options which are currently available to you.

[kallis3]

I recommend that you visit www.iva.com for a list of companies to try. There are several debt advisors on here Andy Davie and VikiW you could try, or Melanie Giles comes highly recommended by a lot of posters on here.

Give one of them a call to get advice as to the best way forward for you.

[yahwob]

Hi,

Thanks for the replies so far, was thinking i wouldn't get any on a Sunday [:)]

The thing which is making me think is the amount that I might have to remortgage for. using the example given be melanie I would remortgage for 85 percent of the value of the house which is fair enough. I am expecting (hoping) to be paying approx 200-250 pounds a month on the IVA which would be say 2500 per year. So thats 10,000 over the 4 years.

Then in theory the house will be worth more than the current value in 4 years time and the mortgage amount would be reduced by another 4 years payments so I could well end up with a fair bit more equity.

The way I see it is if I have to raise the 85 percent equity in 4 years time and taking into accoun the 4 years IVA payments I could end up paying back the total debit in full anyway.

I know morally thats what I should be doing anyway but is this correct?

[MelanieGiles]

We are here generally most of 24/7 yahwob!

It does seem a good idea to repay all of your creditors in full under an IVA, which also gives you the benefit of a complete freeze on interest - but one other thing you ought to be aware of (and I should have mentioned) is that you will only be required to take on additional mortgage lending which costs 50% of your current IVA payment. So if you are paying £250 per month, you will only need to borrow additional monies at a cost of £125 per month, which could reduce the amount needed considerably - especially if you take out the new lending on a repayment basis.

Depending on how much you owe to your creditors, this may not necessarily result in a full repayment, but it will definately mean that your repayment period is limited to five years in total.

[yahwob]

Okay again thanks for the replies so far.

Could you please confirm the following facts as I see them, I am now wondering if a DPM would be better for me. I have two credit card debts totally around 18,000 and a unsecured loan totalling aeound 13,000.

As far as I see the pros of an IVA is that it should all be finished in a 5 year period and I am protected by law from the creditors all the time I'm up to date. the cons are the fact that I will almost certainly have to raise further borrowing by remortgaing my house in year four.

Pro's of a DPm are that I won't have to release any equity in the house, con's are that it will take longer to settle the loan.

In laymans terms is that roughly correct?

Thanks

[MelanieGiles]

That is about the height of it - and you could start of with a DMP to see if creditors will play ball, and if they don't fall back to an IVA. Assuming that creditors will stop the interest, it will take you over 10 years to repay under a DMP - if you go to a non-fee charging company like CCCS or Payplan - longer if you choose a commercial company to represent you.

Another advantage of an IVA is that creditors cannot take any legal action against you once they have accepted the arrangement - and with charging orders becoming more and more popular, you might find that this affects your equity in the long run in any case.

[yahwob]

Don't you ever go to bed Melaine

that last point you made about charging orders, did you mean under a DPM a creditor could put a charge on the house but under an IVA they can't ?

[MelanieGiles]

I am freezing in a hotel room in Bedford - having endured a four hour journey courtesy of British Rail this evening!

Yes - creditors are prevented from applying for a charging order if you are in an IVA, but not if you are in a DMP. Given that your intention would be to pay your debts off in full if you chose the DMP, does this really cause a problem?

[yahwob]

Well mine is an old problem in so far as although I am in debt up to my eyeballs nobody else knows!

In an ideal world I'd rather not let my brother know as he is the joint mortgage holder with me and charging orders being issued would cause problems on that front! On the other hand remortgaging in a few years time wouldn't be so much of a problem for the equity release as we do intend to remortgage at some time in the future but not for at least two years.

Begining to think an IVA may be the best way after all.

[MelanieGiles]

Why not arrange to have a chat with an IP firm to discuss these options further. This does not commit you to anything, but could provide valuable advice.

[yahwob]

Your right of course, spent most of the weekend looking at various sites but this is by far the most helpfull. Already feel better now that I've started to take positive steps to move forward.

I will be in touch shortly via your website to start things moving one way or the other.

Many thanks so far [:)]

[MelanieGiles]

We're happy to help, and are glad that you are finding the site so helpful. We all do too!!!

[David Mond]

Welcome from me too. Unless you can get your creditors to freeze interest a DMP is probably no good for you.

An IVA is probably right - but I don't expect your house price to increase significantly over the next few years or at all. You would only have to re-mortgage up to 85% of your share (not your brothers- although your brother would have to concur) - but then the re-mortgage cannot exceed 85% of Loan to Value and the repayment cannot exceed 50% of what you have already been paying into any IVA.

Look at www.iva.com for recommendations of many reputable IP's some of whom don't sleep at all!