affordability

[rob.b]

hi all i have emailed this post to melanie, and wonder if anyone else has any thoughts my wife and i owe about 37 thousand and currently have around 63 k equity in our house we have a 140 k interest only mortgage we are looking at remortgaging to pay off the debt but from an affordability stance it really doesnt look like a goer i am 51 years old so the time left for a mortgage is pretty tight one option looked at is a part and part mortgage which will be £1070 per month which has me working until i am 80! our current take home is around 2200 per month which includes my wifes benifit (she cant work) i have written to all our creditors asking for a figure of around 50 % as a settlement so i can have a firm figure to borrow (around 40k to include 6 k as a redemption penalty) but the major creditor lloyds have not answered the 2 letters i have sent them and time is running our for a mortgage decision, now after all that what is a resonable percentage of income to spend on a mortgage? and will an application for an iva despite this equity take into account affordability? my belief is that this mortgage offer is unreasonable thanx for reading all this!! rob

rob bignell

[Aaron_]

Hi, not an expert but think as you have so much equity then an IVA isn't an option or you would be required to take some of that equity to make a settlement to your creditors if not pay it all off...Good luck and I'[m sure Melanie will give you the accurate answers!

[gimmewine]

I was in exactly the same position 18 months ago albeit that I was only 40 then so had more time to repay a mortgage. I worked with an agency recommended by my union. IVA was not an option as I had 60k equity in the house and unsecured debts were about 30k

I had a choice of a debt repayment plan which would have taken me 12 years to pay or try to remortgage. Unfortunately, my mortgage was with my bank who promptly demanded all their moneys back and suspended the account. It meant my only option was remortgage. I currently pay about 40% of my salary and will clear my mortgage aged 65.The mortage is a discounted rate which will increase from november leaving me paying about 43% of my salary.

If you want my honest opinion, I would not recommend maxing out on the mortgage because I have found the payments crippling and once again find myself in the trap of being short of 5 quid, getting charged 38 quid then being short for next month. If I was in your shoes I am now reclaiming a small fortune in bank charges which will help me get my kids through uni but it is little too late as I will still be stuck with this huge mortgage.

If I was in your shoes, I would ring all my creditors and try to arrange a debt repayment plan. Citizens advice can help you work out how much disposable income you have to offer and I found most financial institutions accepted their assessment without question. Personally, I would ask them to look at increased payments until you retire with a reassessment then. Like the previous poster I am no expert but been there, done that so to speak Looking back, I wish I had chosen to debt repayment plan, you live and learn

[MelanieGiles]

Hi Rob

An IVA is definately not an option given that you are not insolvent by nature of the equity in your property. I also do not feel that a DMP will work for the same reasons - as you must disclose your true position when asking creditors to support a compromised payment plan.

Personally I would ask the creditors for early settlement figures and then remortgage. I am afraid that you are now paying the price for borrowing money that you are struggling to repay - but the interest rate on a mortgage will be a lot less than on unsecured credit card rates.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk