Mortgage Dilemma

[Charliegirl]

Hi All,

I have visited these forum many times and been very impressed with the responses - so naturally I am hoping someone can help/advise me !

I have a current IVA (commenced Jan 06)and it has worked out nicely so far. However, my circumstances changed in that I now need to move out of home and take on a mortgage with my partner.

All was well, as I had permission from my IP and arranged for a mortgage in principle from a lender willing to offer me a 90% mortgage. (My partner had the 10% deposit needed)

I finally found the perfect house and made an offer on monday - which was accepted. However, I had a call from the mortgage lender to advise that owing to current market conditions, they would now only lend me 80% - which means my partner and I would need a 20k deposit !

My dilemma is now - Do I beg, steal and borrow to meet this deposit (we would need to raise 10k) and get onto the housing ladder ? or potentially raise the funds and propose to pay off my IVA (which is about 12k left)and hope it puts in a better position to take out a mortgage ?

Also - does anyone know how sucessful a proposal on a final settlement could be ?

Any advice would be appreciated

[Emily]

Why don't you shop around a bit through a broker who are more IVA friendly. I assume you are with a big main UK lender. As you are in an IVA you are obviously been asked for more deposit than someone who isn't.It is a shame. And the CML say the £50 billion 'bale out' of banks will make it easy for buyers?????? A Grimm tale

Paying off your IVA now I do not think will make a different as your credit file will still have the 'prejudicial' IVA entry till the 6th year from when you had filed the IVA

There are normally quite a few homeloan specialist on this site offering a service but they seem to have gone incognito??

[Charliegirl]

Hi Emily,

Thanks for the speedy response !

I am actually talking to a mortgage broker who I was recommended to via PayPlan, and I have to say they have been really helpful. I have also spoken to some 'indepentant sub-prime lenders', who are telling me the same thing - which is that those with an IVA will only be allowed to borrow 80% - mainly owing to the poor market at the moment.

I also understand that 12months after I have completed my IVA - I may be in a better position ?

Just not sure whether to 'bite the bullet' and proceed with buying a house ?

[Beans on Toast]

Hi Charliegirl, I know this is your dream home you are talking about, but maybe you will be as well hanging on a while longer. Don't forget,the housing market is slowing down dramatically at the moment so there may be lenders out there willing to give you your 90% shortly.
Not knowing your commitments fully, I would be wary of jumping in at an early stage of your IVA and putting pressure on your finances with three years ( I presume) left to run.
Please don't think this is a negative reply, I am just looking at this from another angle.

[Emily]

In the old days, where the lending was 'obcene' you could get the US or/and UK Banks to underwrite 100% -125% as easy as saying 123

As Beans have said, you could hold off for further price drops in the market. Again no experts can tell you the trend, it is now like a scene from 'Pirates of the carribean -Worlds End' there are no stars in the consternation so we don't know where we are sailing to.

If the 20% drop in house price is going to happen your deposit problem will evaporate as your loan to value will decreasee....just keep an eye on that telescope! And don't listen to the estate agencies - biggest bunch of nitwits I have ever meet.

[Charliegirl]

So true !!

I think you are both right. Financially this could be too bigger risk !

However - would you maybe still consider settling the IVA early, as this may put me in a better position for a better mortgage when things pick up ?

[jpj]

Until your IVA disappears off your credit file in Jan 2012 your best mortgage deals will probably still be from sub prime lenders,and not High St ones!

[Adam Davies]

Hi
I would raise he extra 10k and get on the ladder,and keep your IVA payments upto date.
In the long term you will benefit,I'm sure
Regards

[Reviva UK]

Hi there

is there any standard clasue in the IVA about a year 4 release of equity - even though you didn't own a house when you started?

I actually don't think house prices are going to change for a while so I would personally be inclined to settle the IVA - you may actually pay off less than the 12k and then it is done.

Worst scenario is that you get onto the housing ladder and then something happens to your job / income meaning that the IVA may fail and there is an outside possibility that creditors may pursue you for Br - this may get complicated if you were contributing to a mortgage etc.

I also suspect that you would obtain a more favourable mortgage after successfully completing an IVA rather than during one.

just my thoughts - hope I haven't confused the issue

[MelanieGiles]

Paul

Equity release clauses only apply if the property is owned from the outset of the IVA and not acquired half-way through.

I am with Andy on this one - if your partner can afford to raise the additional deposit, and can afford to make the loan repayments without affecting your IVA, this would appear to be the best way forward.

[Charliegirl]

Hi All,

Thank you for your comments. I seem to keep 'swinging' between pursuing this house and not doing it right now.

I think the best step may be to sit down with my partner and do some serious maths homework before I commit !

Once again though, thank you for the advice.

[mikebdomain]

Charliegirl when you are working out the viability of buying this property, please consider the affordability based on a repayment mortgage and on any reversionary rate, rather than on an interest only mortgage or any fixed or discount period.

Also think about falling house prices and check the area you are considering buying in. Some areas are falling sharply, whilst others are fairly static. We are starting to see some shocking valuation reports where over 3% has been lost on the property value in just twelve months.

[Charliegirl]

Hi Mike,

Thank you for the advice. The mortgage quote I obtained was based on an interest only (fixed rate) deal. You have made a good point in that we need to consider this in this current market.

The property we have offered on is actually a repossession property, which in todays market is worth about 115k - but we have had an offer of 99k accepted.

I am aware that we could still be outbid on this, but it seems to be in our favour at the moment ?

I am so confused !!!!!

[Emily]

If it is an auction property will I am incline to say it is a very good deal as it is already discounted and how much more can it fall????????

True, thre could be bigger bargins and they will be.Maybe a 90K offer in the future is possible for a similar property....the funs starts.....

[Charliegirl]

Hi Emily,

It wasn't an auction - just a property that we booked a viewing for as it seemed so cheap ! Our offer has been accepted - but we have to move fast.

I am concerned about how much all this is going to cost, as although the house is an excellent price - this is all proving really stressful.

As you say - it may be better to wait, but them my circumstances are such that I need to get a place of my own, as my parents are moving away.

Does anyone on this site know much about shared ownership and whether this would be a good option ?? I would be taking out a smaller mortgage, but once my IVA is completed I would be in a better position surely ???

Feels like my life is on hold !!!