Last month I made a posting asking the question what happens when your mortgage payments reduce, unfortunately I received two different answers, so I am not clear.
I was advised by one person that all of the savings will need to be added onto my IVA, yet another person advised me that only 50% will need to be added onto my IVA. So what really is the case?
My IVA started in May so I believe I am under the new protocol rules.
I am currently on a fixed rate interest only mortgage.
Last week I contacted my mortgage company as my fixed rate is due to end mid-December. At the moment I pay around £900 per month.
When the fixed rate ends I will automatically go onto SVR and my payments will be around £342 per month. Therefore making a saving of £548.00 per month.
I have been thinking about going onto a repayment mortgage so that I can start paying some of my mortgage off. Can I do this whilst in an IVA, or do I need to stick with interest only on SVR and put all of the savings I am making into the IVA?
I would like to know if I am still in a position to make my own decisions regarding my mortgage and how I want it to be repaid.
Theres no point in paying off your mortgage with any extra you have as you probably have an equity release clause in your IVA anyways(and creditors wouldnt allow you to pay extra to your mortgage). As far as I understand it any savings you make off your mortgage going onto an SVR will go into the IVA pot. The 50% thing is an overtime rule,not for a reduction in an expense like a mortgage.
Why not apply for another fixed rate with your mortgage company?
You may find that you will have to remain on interest only as creditors wont want to lose out on available money,and many people who start an IVA are forced by creditors to switch from repayment mortgages to interest only to free up funds.
Paul
Discharged today the 8th feb 2012. View is much brighter now.
Continuing to rebuild our credit worthiness.
My understanding is also that the additional amount will normally be added to your monthly IVA contribution.
Plasticdaft makes an excellent point about giving consideration to another fixed rate mortgage; even if the cost is a little higher.
As you will be living on a fairly structured budget for the next few years an increase in mortgage rates might leave you unable to make your IVA payment. There are processes in place to deal with this but you will not be wanting to go through this process each and every time there is a change in mortgage rates.
Most mortgage advisors lean towards suggesting fixed rates wherever their client has a limited ability to absorb an increased mortgage payment.
Mortgage rates are historically low at the moment and will inevitably revert upwards at some point in the future, though nobody knows when. The long-term average for mortgage rates is around 6%.
Andrew Graveson
Bright Oak Ltd
UK Debt Management Company
Website: www.brightoak.co.uk
It really does depend upon the terms of your actual proposal. All IVA proposals are unique and tailored to suit individual circumstances, but if your IP is using the IVA protocol then you may only have to pay over 50% of the saving.
You should seek the advice of your own IP on this point, who has detailed knowledge of your case and individual circumstances, and should be best placed to advise. If they seek 100% of the saving, ask them to confirm to you which section of your proposal or the associated terms and conditions they are relying on so you can understand their decision.
Hi Melanie, thanks for all of your help and advice, I will contact our IP ASAP.
If we are able to keep some of the saving then I was hoping to earmark that towards paying for a new boiler. British Gas will only continue to service my boiler whilst parts are available but last time they came out they said the parts were becoming obsolete.
They came out and quoted us for a new one at around £2500! We certainly do not have those kind of savings if the boiler does go once and for all.
Blimey missy that is very high cost for a boiler, have you tried pricing up at your local builders merchants. Most places sell boilers and may know of a plumber that could help. We bought ours from Jewsons a few years ago. Also there may be a government boiler scheme in place that can help with costs. we had to get our plumber to buy the boiler and we saved about £200 onit.
I'm having boiler problems and will be doing it by sourcing a cheaper boiler direct from merchant and paying someone to fix it and putting British Gas maintenance plan in place as soon as it's fitted!
Will be 4 weeks before I can get a fix due to money not being avaialbe until then
IVA final payment left the bank on the 26th January 2013...looking forward to a debt free future.
ours still has its spitter valve problem and hubby having to top it up each day, but our plumber friend is gonna be coming to sort it out for us,thankfully. Boiler insurance a def good job. In fact as I type this an advert is on tv for AA, its £5.99 a month for plumbing cover but with boiler inc its £12.99. Don't know if that is good or bad.
Definitely going to get quotes for a boiler somewhere else.
We have a British Gas service plan already in place but the engineer did point out last time it broke down that the parts for our boiler are becoming obsolete. The price we were quoted does include all new pipework to be installed and the plumbing etc.
Always a worry boilers, especially with another harsh winter on its way.
My advice, if British Gas has told you the parts are or becoming obsolete, get another Gas engineer (one recommended by word of mouth) to have a look at it. BG are reknowned for telling people parts can not be got hold of when they can and giving inflated replacement prices.
An old lady near to my dads was told that by BG and given a price of £5,000 to replace the boiler and radiators (she was told thay needed replacing too) she had a word with my dad who put her onto the engineer he gets in and found the parts were still available and that if and when she needed it all replacing it should have only cost her around £2,500 with him.
Whilst in my British Gas plan I have not had to pay for any replacement parts as its covered under the plan. So far so good.
However it is an unreliable make and model as I have had BG out to it more times than I can count on two hands. Its basically on its last legs.
I do not really want to have to go through yet another winter worrying about how long my boiler is going to keep working for and if its still working when I get home from work. Each time it breaks down I have to take time off from work out of my annual leave to wait for engineer to come. Lost 2.5 days of my leave this year cos of the damn thing!
I have finally heard from my IP today, after asking the question on savings on the mortgage. It appears we are best to seek a new long term fixed rate. Our lenders cheapest rate is 5.99% for 5 yrs which means we will not make an savings at all.
I wondered about the term too, only thing is that if you are in a five year term when you come to need to do the remortgage for the equity (if you could get it) then you would be finishing the term early and would then have penalites to pay....this is something we became aware of recently when looking at getting our mortgage redemption statement. Ours doesn't finish til April but we would have approx £3K in penalties
