75% of equity into IVA in the FIRST six months

[b.w]

Is it just me or has anyone else had to put 75% of their equity into their IVA in the FIRST six months, i was told it would be within 6 months of it ending, it came as one huge shock when the IVA was accept but no one thought to tell me the change!

[MelanieGiles]

Hi bw and welcome to the forum

I feel that there must be some mistake here - are you saying that your IVA provides for you to remortgage during the first six months! Are you sure that this does not just require your property to be professionally valued during this timescale, with equity based upon that valuation raised during the final year? How long have you been in your IVA and which IP firm is acting for you?

[b.w]

Hi Melanie

Absolutely sure, I am with Payplan and had to release 19K in Sept 06, the IVA was proposed and accepted in March 06, i was told at the outset that it would have to be released within 6 months of it finishing. It was no mean feat finding that sort of money when you are told DO NOT borrow more than £500, a bit hypocritical really, in the end i only managed to raise 15K of it, I refused to remortgage with one of the rather expensive subprime lenders they offered me, the rest i am having to scrimp together weekly.

My propery was valued prior to the IVA proposal and i suspect it was because 95% of my debt was to HMRC that the equity had to go in up front.In total they will receive 65p in the £, which reading this forum is rather good for them..

[MelanieGiles]

So if the equity was raised at the beginning, then presumbably there is no need for you to raise anything at the end? So at least you don't have that burden hanging over you for the next couple of years.

[ianmillington]

I assume you are self-employed? HMRC do at times work in a different way to the other creditors.

Basically where they see realisable equity they would much of the time prefer to get this early and have a lower subsequent monthly repayment than the other way around. The reason is simple, because the IVA of a self-employed person is dependent on income which is not certain (or rather less predictable than someone who is employed)it is far more likely to fail than that of an employed person.

As a result they go for a degree of certainty.

Ian

[Adam Davies]

Hi
I can see the logic in this and wonder why creditors do not insist on equity release at the start more often,especially if there is more than,say,25% equity.This way a debtor could fix their mortgage for five years and have no worry of remortgaging again.Creditors would have a lump sum guaranteed and the IP would have their fees guaranteed.
The only downside for the creditor is reduced monthly payments during the five year IVA due to increased mortgage payments.
Interesting
Regards

[ianmillington]

Just to add Andy that my experience is that HMRC will not generally want a second bite of the cherry in the form of a second remortgage, so the maker of the proposal also has a degree of certainty too.

Ian

[b.w]

Just out of interest do other IVA clients have the property valued at the outset and the % equity set in monetary terms then or do they have to have the valuation nearer the end date and pay the relevant sum?

Having used money from a source other than my house (oh, kind boyfriend[:I]) I still have the equity in my house and was planning on trying to release it in the last year to make a lump sum F & F payment. I'm a tad wary though, if i'm not careful i could end up getting stung. Any thoughts anyone?

I suppose i'll be classed as sub-sub prime and have a flashing Don't lend sign on me be then..

[MelanieGiles]

If you don't have a final year equity release clause, you can do what you like with the equity and a full and final offer of settlement is a good idea.

[Emily]

There is no question according to Economist from JP Morgan cited today that there will be a housing downturn of 20% very soon - a drop of 20% in house prices. If the creditors are smart they should do the 4th year EQ release thing now whilst EQ exist.The country's economic situtaion is not going to improve that easy-human pessimism prevades until when?....Many Americans have already walked away from their Neg Eq borrowing after seeing 10% decrease in their properties.....the UK is coupled with this US fiscal crisis now but how long???? The banks aren't very smart these days as traders in savings or in debt.

[ianmillington]

So the potential is that many of those concerned about year 5 equity release clauses might actually turn out to have nothing to worry about!

[Emily]

I was thinking of 'other' positive side to my point and that means IVA holders and BR people can get on the much vaulted housing ladder game.

140K for a average house is a reality vey soon-WE WILL VOTE FOR THAT PROPOSAL....hip hip horray

[ianmillington]

Quite possible, yes. However, it's such things generally happen due to increased repossessions. Last time there was a price-fall of that magnitude was at the start of the 1990s at which point banks refused to lend to almost everyone, because they had just got badly burned fingers.

The months ahead will be very interesting, to say the least.

[size5]

Ian, do you not think that trying to 2nd guess what may or may not happen in the housing market is notoriously tricky, even for someone from as respected a firm as JP Morgan?
Having said that, my own feeling, for what it is worth, is that whilst homeowners may be in for a rough ride in the short term, the smart ones will sit it out and ride the storm. The law of supply and demand will prevail, the less supply the greater the price.
A very real factor, as you allude to, may turn out to be that if the pessimists are right and repossessions soar in the next 12 months there will be a lot of housing stock going cheap which will drag down general prices in that period and for a while beyond.

Interesting indeed.

[ianmillington]

Hi Michael

It's quite clear that at the best of times prediction is an art, rather than an exact science. There are so many experts around too, who are all likely to contradict each other. For instance, by all accounts, bearing in mind what the experts said 3 years ago, the IVA as a concept should now be dead! So basically in reality no-one actually has a clue what the future will hold.

Suffice to say that Chez Millington won't be going on the market any time soon [:D]

Ian