www.iva.co.uk

Hi..I've just been told by the National Debt line that I wouldn't qualify for an IVA because I have a variable rate mortgage. It's currently at its lowest (£435) but will soon start rising again (at its highest it was about £1100). I can't afford to switch to a fixed rate as this will be in the region of £1000. Has anybody else experienced this? I really don't want to consider bankruptcy at the moment.
Thanks
Deb

Hi Debs. It would be impossible to guess when interest rates are to rise so this does not preclude you from proposing an IVA. If the rates increase, your payments can be adjusted downwards or you can switch to interest only to keep the payments the same. Fixing may be an option if your lender would add the cost to the loan but this would have the effect of increasing your monthly payments at the moment. You should take a second opinion as an IVA may be an option.

Thanks Michael. How many times could the payments be adjusted, as interest rates can chnage several times in a year. Unfortunately I'm already on an interest only mortgage.
Thanks Deb

Debs is there a reason you dont want to look at bankruptcy? Any equity in the property??

Paul

Hi Paul..I haven't had my house valued within the last couple of years, but I don't think there's much equity in it (if there is then it probably isn;t much more than 5-10,000). Thanks Deb

Are you paying on a repayment basis or interest only? If repayment, you could always drop the payments to interest only - or sell and move into rented accomodation. There are options, and it is strange that you are being told by the National Debtline that you do not qualify for an IVA because you have a variable rate mortgage.

I suggest you try a couple of IP firms directly, to see if they concur with that advice.

5 years is a long time and there is no way of predicting how interest rates would go. Creditors will allow reductions to take into account changes in circumstances but if they highest you were paying was £1100 per month was that actually affordable? If not, it does not matter whether you apply for an IVA or bankruptcy because if the rates go to a level that is unsustainable you would lose your house if you cannot make the mortgage payments. Fixing may be a suitable option to protect yourself but as Melanie says contact IP firms directly who may be able to help knowing the full story. The advice is free.

Hi Melanie..I'm already on an interest only so I feel I have no alternatives in terms of mortgages. Is it possible to adjust payments during the iva as interest rates change? Or is this too high risk for the creditors?

I've got a bit of a similar dilemma, my fixed rate of 6.49% finishes at the end of Nov, when hopefully my IVA will be in place.

I am with Mortgage Express who are no longer offering any fixed rates, so I will revert to standard vasriable which is currently 4.something%

So, my mortgage payment will go down quite a bit. I have been advised that depending on how much it goes down will depend on whether I would have to increase my IVA contribution and if/when it goes up my IVA contribution may decrease, it all seems to be a case of knowing what the figures are as and when it happens but all the same it's a bit of a worry as 5/6 years is a long time!

This is a common problem but one creditors are aware of. Bear in mind that as rates have tumbled the IVA payments of those already in IVAs have increased as have the dividends. When rates do start to increase the voluntary contributions will decrease but no one knows when that will happen.

In an ideal world your IP could vary the payments as each change takes place but given he/she has no discretion it requires approval of creditors if a reduction is sought below the original contribution level.

Cheers Michael, so I guess in my case, I could be classed as lucky as I'm paying well over the going rate at the mo!

Cath,at least you can afford your payments at nearly 6 and a half percent and I assume your IVA proposal is based on mortgage payments at this rate. Your IVA will only require a variation if rates climb above that level in the next five years which hopefully will not be the case.

Thanks again Michael. Yes, the IVA is based on payments at this rate. So, in your opinion, when the rate goes down at the end of November would my IP need to inform the creditors of an increased disposable income due to the rate decrease? It's likely to be in the region of £150 per month, assuming rates stay the same as they are now, although we will be on a v tight budget regardless of this.

Your IP[ can increase the payments when the rate decreases and then as rates start to increase he/she can reduce your payments again. It will only become an issue should you need to decrease your payments to below the original payment.

Thank you, that's clear for me now.