Me too Clare, it's all very well saying that you can then remortgage when the iva drops off your file, but if you then have a high ltv after having taken on a secured loan, then there isn't going to be much chance to restructure the sub prime loan is there?
It also means that people approaching retirement age are going to have think extremely carefully about an iva which would now mean them increasing their secured lending dramatically into their pension years.
I absolutely understand why creditors would want as much back as people can afford, however, we now know property prices don't always increase, by taking out a secured loan on x amount of equity could in reality mean in a few years if your property decreases in value, this leaves you saddled with high interest secured debt and negative equity potentially to deal with.
Sorry, if I was looking at a debt solution now, I wouldn't touch an iva with a barge pole, it would be a dmp all the way for me
At least it's going to put an end to the 'be debt free in 5/6 years' claims, I can't personally see any attraction of an iva now over bankruptcy, the whole reason many people took the iva route was to protect their houses which would be lost in bankruptcy, now that's not the case, anyone with equity really should think hard about just doing a dmp instead, at least with a dmp you have the flexibility and keep your equity, plus your debt will probably be repaid in a similar time frame now
Hi Clare. I agree to a certain extent but then unsecured creditors do have the option of going for a charging order to secure unpaid debt pre-IVA and bankruptcy will also put the property at risk. In terms of the equity release debate a remortgage would clearly still secure more debt but there is already a charge on the property to protect creditors interests anyay.
Specialist Mortgage Advisers. Highly Commended at the British Mortgage Awards.
The bulk of clients who have equity in their property have already investigated a remortgage or secured loan before they come to us. We discuss the option of consolidation with our clients beforehand as it is a legitimate tool to repay your debts but not suitable in all cases.
Clients then agree to remortgage in month 54 and repay creditors what they can afford and an IVA gives legal protection for them to do that. Bankruptcies and charging orders can lead to the loss of the family home so DMPs are not the answer for serious debt problems although they also can be the right options.
If clients are properly advised at the outset of what they will have to pay then there is no issue but it would be wrong to scaremonger about IVAs and have people stuck in unending DMPs with no legal protection or proper end date.
Although I do feel now if there are companies willing to do a secured loan for people in an iva then they will be willing to do one for people in serious debt who haven't gone down the iva road yet, the only reason many people who have investigated remortgaged and secured loans and not taken them and gone down the iva route is because up until recently, they would be refused, most people if they have the option would take out a remortgage or secured lending to pay off debt before going for an iva, there will now be no need to do an iva if a secured loan is now going to be available.
I'd rather be in an unending dmp that an unending iva as it now appears to be
As has been said before, these options are good for some, but not for all. All I hope for is that the repercussions are FULLY explained at the outset.
We have heard, far too many times, that the current position has often been glossed over at the start of an IVA, and some are getting bitten now.
It still amazes me how many people seem to be surprised by the equity question when month 54 looms --- and this is largely down to lack of initial explanations on the part of the IP, or, more often, the introducers.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by Michael Peoples
The bulk of clients who have equity in their property have already investigated a remortgage or secured loan before they come to us. We discuss the option of consolidation with our clients beforehand as it is a legitimate tool to repay your debts but not suitable in all cases.
Clients then agree to remortgage in month 54 and repay creditors what they can afford and an IVA gives legal protection for them to do that. Bankruptcies and charging orders can lead to the loss of the family home so DMPs are not the answer for serious debt problems although they also can be the right options.
If clients are properly advised at the outset of what they will have to pay then there is no issue but it would be wrong to scaremonger about IVAs and have people stuck in unending DMPs with no legal protection or proper end date.
To ward off any scaremongering Michael,
Could you post the general current interest rates, total interest payable and associated set up fees and early repayment penalties people taking out secured loans to meet equity release clauses within their IVA`s are currently being offered - as per Andy`s £20,000 15 year example please?
What I have never seen on the forum in such debates is any info of this kind put forward by any of the experts advocating secured loans.
I`m sure if people can see that they are not going to be saddled with a huge credit card like APR and end up paying the price of a house in interest over the term of an example 20k loan, they would all be appeased.
"When the seagulls follow the trawler, it is because they think sardines will be thrown into the sea".
My own view is that this is a storm in a teacup, as the ability to get a secured loan based on the other resttrictive criteria of the protocol - affordability, length of term etc will make it quite diffiult for anyone to get a secured loan.
We have recently done a back review in my portfolio of cases where equity release is relevant over the last 13 months, and on only one occasion would it have been possible.
As an IP in practice, I have to work with what I am given, and if the Insolvency Service choose to amend the rules then so be it. Personally I don't see protocol DMPs growing at the expense of IVAs - but it is vitally important that clients be given the full facts to enable them to make appropriate choices at the outset.
I just wonder how the secured loan market will move in the next five years Mel ? Rising house values, more competitive secured loan market plus low interest rates I think we could see a surge in secured loans right up to 85% loan to value.
Feels quite a big change to me and one that may move people towards DMPs if the term on paper is less than 10 years
I have just been told I couldn't, take a secured loan to offer full and final because creditors would not accept taking out new debt you pay old surely this is now the opposite
I ask about relevant interest rates being offered because the only rates I`ve seen quoted on the forum are from people in IVA`s being ushered towards secured loans recently - and the rates these people have been quoted have been around 19.9%APR.
Furthermore, there are many people who will be paying very large IVA payments (not all people in IVA`s pay £200 - £400 per month) and so their affordability under the 50% provision will be much higher than others.
Example:
Someone aged 40 reaching the equity release stage of their IVA making an IVA payment of £700 per month with £20,000 equity.
In this example under the `affordability` provision, they would have to borrow the £20,000 over 25 years at a repayment amount of £334.07 per month, if it was at the 19.9% APR I have seen posted as offered on this forum by debtors the total interest payable would be £80,221
Also, anything could happen to the debtor over 25 years that could result in them not being able to maintain payments, resulting n the loss of their home.
Not really a way out of debt at all the IVA anymore for many - quite the opposite in fact.
"When the seagulls follow the trawler, it is because they think sardines will be thrown into the sea".
Maybe an IVA would still work for some but as always its about the numbers.
House Value
Income
Affordability
Mortgage Term left
If your paying in more than £250 pm into an IVA with more than 15 years left on your mortgage and have 20k + equity then you are almost certainly going to be a viable candidate for a loan after 5 years.
If your the other way then the figures wont stack up and you will do an extra year.
That's my take on it but I wouldn't listen to me too much as im thousands in debt
Hi Goosed, I'm probably better placed to answer your question, although I can only speak from my experience. Rates are most commonly between 11.9% to 13.9% (normally the same rate as an identical application from a customer who hadn't had an IVA). Any fees charged will depend on the case but effectively these costs are borne by the creditors as they are deducted from the amount raised. In any event these fees include the cost of the valuation of the property for the lenders purposes, legal fees and other third party costs/fees. In a remortgage situation many of these fees would have to be paid by the debtor up-front. It's why, in my opinion, the APR is less relevant because with a remortgage the cost is spread over the entire debt, therefore the APR shows lower. As regards some peoples IVA contributions vs. 50% rule being higher than others and the risk of something happening which could result in them not being able to make payments, that's exactly the same as with a remortgage. The IVA scenario is a unique one and I can only reiterate that each case needs all options to be considered.
Specialist Mortgage Advisers. Highly Commended at the British Mortgage Awards.
