I am not yet in an IVA but am currently considering it and speaking to several IVA companies ( I must admit I am not over impressed with some of the ones I have spoken too so far). My question is regarding possible equity release in the final year.......
I have approx. £40k of equity, current house value £220k, the mortgage is in my name only with 17 years remaining on the mortgage.I have unsecured credit debts of £125k. As I am now aged 46, any IVA I entered would conclude when I am aged 51 at which point I would have approx. 12 years remaining on my mortgage. Lets assume for arguments sake that my equity would have increased during the period of the IVA due to mortgage payments but the house value remained at £220k. i.e. I would then have £60k available equity in the 5th year of the IVA. Based on this assumption, my questions are as follows:
How much of the equity would I have to release to my creditors?
Would it be 85% of the value of the house or of the available equity?
Would any remortgage remain in the existing time frame, i.e. finishing when I am aged 63?
Would any remortgage be limited to 50% of my existing IVA payments?
If I was unable to raise additional monies via a remortgage would a 12 month extension of my monthly payments be offered?
Could the creditors/IP make me bankrupt if there was equity availeble but I was unable to release the equity?
I fully appreciate that my creditors will want to realise as much of their money from me as they can, but I am concerned that I will find myself aged in my early 50s with a massive mortgage due to the equity release.
You raise a number of valid points and until the creditors have voted it would be impossible to give a categoric answer. However, in normal circumstances you would be expected to remprtgage to 85% loan to value and your mortgage payments cannot increase by more than 50% of what you were paying into your IVA. Therefore if your property remains at the same level and your mortgage is interest only there would be no equity to raise. If your mortgage balance reduces to £160k you would be expected to raise £27k i.e £220x85% less £160k. It relates to the value of the property and not to the amount of equity in the property.
You would look to obtain at least one offer of remortgage and mortgage companies are loathe for mortgages to continue after retirement so what you could raise would depend a lot on what mortgage products are available at the time.
If you are unable to release equity your IVA would be extended by 12 months but provided best efforts were made and evidence produced that you were unable to remortgage, it would not constitute a default and your IVA would not be failed as a result.
Finally, many IP firms operate the protocol system which incorporates the above but not all creditors accept this. Your IP should be able to advise whether your IVA would be accepted under these terms but if you are self employed, have trade creditors or owe money to HMRC there may well be different terms inserted at the meeting of creditors. Sorry you are not getting much response from IP firms but until the outcome of the voting is known at the meeting it is impossible to determine for sure what your obligations will be. At this stage you can agree to any new conditions or withdraw your proposal if they are unacceptable. What I would say is given the level of your debt it does seem that you need assistance as your property could be at risk anyway if things get any worse. Good luck with your proposal.
Last edited by Michael Peoples on Fri Jan 15, 2010 11:05 am, edited 1 time in total.
Thank you for your detailed response, if only all IPs were as informative and as helpful as you.
I would also like to add that of all of the IVA companies I have been speaking to, the only two I would rate as the most professional and reasuring are The IVA Advice Bureau (Tina is amazing) and McCambridge Duffy although I was unable to speak with you direct the lady I spoke to did know her subject very well.
Thanks again Michael for your advice as it all helps when trying to decide the best solution to my debt problem.
Thank you for your complimentary comments about Tina from my team David. She has asked me to ring you to discuss your case in greater detail, and I will try and do this over the weekend. I will e-mail you to check your availability this evening.
Like you I am heavily in debt (£134,000) following the collapse of my business and when my business partner went bankrupt I was left with all of the business debts as well as my own personal ones. I have now been in my IVA for 12 months and pay £200 per month - which is brilliant compared to what I was trying to pay back prior to the IVA being accepted.
My agreement states that at year 5 I must try to remortgage and pay back 85% LTV. Our house is currently worth £325,000 with a mortgage of £149,000 and as we are renovating it the price will increase as the work is done and the mortgage goes down each year.
Like you, my question is, at year 5 I will be 57 and my husband who is self-employed will be 60. I am assuming that at this time we will be looking to probably raise nearly £100,000 based on these figures. But, as my IVA payments are £200 per month does this mean that if the extra mortgage payments are more than £100 (50% of current payments) that I would not have to re-mortgage? Also at our ages then, how long would they expect us to obtain a mortgage over as especially in my job I would not be able to work past 65. Sorry - hope this makes sense? The IVA also says that if we can't remortgage we would be expected to pay an extra 12 months payments which is fine. Tobymoz
If that is what your proposal says and creditors accepted it you may be fine but you would need to speak to your own IP for clarification. However, I would find it odd that creditors accepted this without some form of modification to protect them. If you were self employed I assume there were debts to HMRC who have their own modifications and conditions for acceptance of IVAs.
That is a lot of equity & I would imagine your creditors would want more than the 2400 they would get from an additional year. Mortgage terms don't have to be for 25 years either, they may lend some of the equity over say 15 years.
A lot of proposals state that if you do manage to remortgage, your repayments cannot be more than 50% of your IVA repayments, so that may stop a lot of people being able to do this.
David - let us know if Melanie was able to help you.
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
I was able to help David, but now down the route of an IVA. He is happy with the solutions we discussed, and knows that if there is a positive change in his circumstances this will open more doors for him.
Hi - thanks for your help - I have checked and it does say that the remortgage payments must not be more than 50% of the IVA payments - so I'm not sure we will be able to do this anyway. Can they take it any further? thanks Tobymoz
It really depends up the terms of your actual IVA documents, which is why it is very difficult for the professional experts to give advice on a forum where we have no real knowledge of your case. Have you asked your own IP to advise you on this point?
