been advised by phone to remortgage

[rickyg33]

An advisor has suggested raising extra money to make an offer to creditors by remortgaging.........whether or not this is the way we proceed is neither here nor there, although our current mortgage includes an early redemption penalty [about £3,500], so that's one negative aspect.

My question is, what would you expect in terms of fees to set this all up? My understanding is that if accepted, the debt would be gone giving us a fresh start.

I have had a good look in this forum and asked questions about monthly IVA fees [possibly around £4,500 for a 5 year IVA] but surely the cost of going for a one-off offer at the outset would involve less work for an IP, and so a smaller fee?

The advisor has indicated the fee would be about £4,500........very similar to the one payable in a monthly IVA.

rickyg

[Jo Rolland]

Depending on how much you have to offer to your creditors by remortgaging, it could well not be necessary for an IVA as you can make Full and Final Settlement offers directly to your creditors.

I know some companies do charge for this service but it is usually a minimum of say £500 or 10% of what they save you.

[rickyg33]

The advisor is suggesting raising about 26% of the debt owed, which I find a little low, since one of the creditors is HSBC and the received opinion is that they normally look for 40% - at least in an IVA.

rickyg

[ianmillington]

It is always worth getting a decision in principle from a mortgage lender, then working out how much each creditor will get on a pro-rata basis and see if they will accept that.

Did you contact the mortgage advisor or was it the other way around? If the latter, they've got your name and address from somewhere - do you have a CCJ registered, in which case ask how that affects your ability to get a mortgage.

Does the advisor fee come out of the mortgage advance, or is it commission paid by the lender? If the former, then it's going to cost you a total of £8k which now starts to sound a lot of money. Have you approached your current lender as it may be possible to do it through them, saving on setup fees and perhaps negotiating away some of the redemption penalty?

Hope this gives you food for thought.

Ian

Ps your reply landed whilst I was typing. I don't know what HSBC would insist on by way of F&F without an IVA. You can ask!

[carlmcmullen]

Ricky i am recluctant to advise on this one without knowing the facts of your case.

Are you not able to offer any contribution at the moment - your creditors may expect you to.

From your creditors point of view, they could have 60 payments plus re-mortgage or just a simple re-mortgage - i know which one i would accept.

As Jo said you could still end up with a brokers fee to pay in addtion to the redemption fee and costing you alot more.

Carl

[rickyg33]

The facts are:

property value = £200,000
current mortgage = £125,000
debt repayable = £90,000 approx

The advisor has suggested:

remortgaging to raise an additional £27,500 for the creditors
plus £3,500 redemption penalty [existing mortgage]
plus £1,000 solicitors fees
plus £4,000 [approx] fees payable to advisor

new mortgage amount = £161,000 approx
new mortgage term = 20 years

current mortgage = £811 per month
increased mortgage = £1220 per month [approx]

Benefit - debt is removed without need for IVA, credit rating not affected for the full IVA term plus 1 year

Drawback - higher mortgage payment for a long period

An option is to take an interest only mortgage to keep payments down, then revert to a repayment mortgage after a few years

[mikebdomain]

Can I ask did this 'advisor' contact you, or did you contact them.

With those level of fees I would talk to at least a couple more mortgage advisors/brokers, they seem very high.

[MelanieGiles]

I am sorry - I just do not feel that this sort of offer would be acceptable to creditors, as I think I mentioned in your other posts. There are huge costs which will eat into the equity available, and a relatively low offer compared to the value of your interest in the property.

With regard to fees for a full and final settlement, I would expect you to be charged anywhere between £3,500 and £5,000 depending on the amoun tof work which has to be done. - I take it your query about fees actually related to IP fees and not those of the mortgage broker?

[ianmillington]

So, if I read it right......

You borrow £36k (an increase of 28.8%)of which you then pay out £8.5k in setup/redemption costs and your mortgage payments go up by 50%? Sounds a bit dear to me. The interest rate must be pretty high.

I recommend you speak to your existing lender first to see what they can do.

Also, how many creditors make up the balance of £90k? The greater that number the higher the risk of not getting across the board agreement.

Ian

[rickyg33]

Regarding who contacted who, we contacted them........

The advisor has stated that the offer of a percentage immediately is likely to more favourable than five years of payments with the possibility of defaulting.

My head is spinning now....

I had sort of got into my head that there would be an amount per month, plus a remortgage to add extra equity in year 4. I even went to the trouble of getting the expenses guidelines from Melanie's company and seeing if we could manage, etc, etc.

Then when we finally start asking around we get thrown off course by suggestions of immediately raising capital. It's bizarre.

I'm drawn to the vision of paying more per month in mortgage but at least knowing any extra income is ours to keep and maybe reduce the mortgage going forwad. On the other hand, I'm averse to paying over 20 years.

I knew that there'd be no straightforward answer. How right I was.

[mikebdomain]

Ricky the remortgage is possible to arrange, (sounds like a 'future' 6.9% product) but costs quoted for doing the job are way too high. Unless obviously it includes a fee that includes debt negotiation.

Also Melanie has already said that the offer is unlikely to be acceptable to your creditors. The mortgage advisor can not possibly offer advice regarding the success of a full & final IVA.

Without knowing all the details its difficult to offer advice, but as it has already been suggested approaching your existing lender is always a good idea (for a possible further advance), but to be honest, with the details you have supplied thus far, this sounds like a case that my advisors would be telling you that a remortgage at this stage, would not be in your best interest.

[rickyg33]

The suggestions have come from an IP source that we contacted.

We have had a phone call from a mortgage arranger after the initial contact from the insolvency advisor. The broker was the one quoting mortgage repayment costs.

The fees quoted include professional fees to represent us as negotiator with our creditors.

I'm certainly looking into raising the equity now myself. I didn't think there'd be the likelihood of the creditors accepting, say, 30% of the debt owed. Now I'm thinking that if I can use my existing mortgage lender, and save all but the solicitors fees, there'd be a few thousand more to offer the creditors.

If I could raise £35,000, some of which would go to solicitors fees and mortgage penalty fees, the balance of £30,000 or so [about 33% or so of the total debt] could be offered to the creditors.

rickyg

[MelanieGiles]

I am sorry - I just do not feel that this sort of offer would be acceptable to creditors, as I think I mentioned in your other posts. There are huge costs which will eat into the equity available, and a relatively low offer compared to the value of your interest in the property.

With regard to fees for a full and final settlement, I would expect you to be charged anywhere between £3,500 and £5,000 depending on the amoun tof work which has to be done. - I take it your query about fees actually related to IP fees and not those of the mortgage broker?

[rickyg33]

one suggestion was to approach the creditors individually.....

If, and it's quite a big 'if', I were able to raise a remortgage myself that enabled me to make a near-50% final offer to each creditor, would the chances of it being accepted be quite favourable?

Anyone been through this and experienced it?

[MelanieGiles]

I have seen it done - but you will spend a lot of time ringing and chasing and trying to find a decision maker!

Andrew Graveson of Brightoak, who posts on the forum as an expert, is a mortgage broker and a DMP specialist. I have seen Andrew negotiate early settlements with creditors from the raising of equity monies, so you might find it useful having a chat with him.