equity in our joint house that has to be released

[alan.p]

Hello,
I am considering an IVA which will also be linked to an IVA for my wife.
I have been told that at the end of the 4th year the full amount of equity in our joint house has to be released and paid into the IVA fund. Is this correct? I thought it was only 85% of LTV


Is it in legislation that all of the equity in my home has to be released?

[Sensible77]

Hi. I have a joint mortgage with my wife, but in the 4th year only up to 85% of my half of the equity is to be paid to my creditors. I think this is standard practice. Who has told you otherwise?

[MelanieGiles]

The usual modification received from creditors relates to equity released from an 85% loan to value re-mortgage. You would rarely be asked to input 100% of the equity, as the only real way of getting this would be to sell - which the creditors would not want you to have to do.

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

[Sensible77]

Sorry, but I misunderstood the question. I see that both people are looking at an IVA, not just the husband, so it will be 85% of the total equity.

[alan.p]

Hello, thanks for your responses.
I am in the ealy stages of setting up an IVA and have spoken to an IP, they initially told me that 85% of the house value less the outstanding mortgage would be paid into the IVA pot at the end of year 4 which in our case would be a few thousand pounds and that together with the contributions would give the creditors a dividend in the region of 35%. I am still gathering information but when I spoke to them a few days ago they told me that legislation has changed and now 100% would have to be paid in which would mean £29000 being raised and the creditors receiving a 93% dividend. Obviously I will not be "debt free after 5 years" as I would be left with a 100% mortgage. I recently switched to an interest only mortgage to reduce my monthly outgoings and to enable me to make a reasonable contribution, with a view to switching back to a repayment mortgage at the end of the IVA.
If legislation has changed then I dont think an IVA is right for me, however I may have burnt my bridges as I have stopped making payments to creditors for the last few months in anticipation of starting an IVA and now have a pile of default notices making it difficult to raise finance.
Any further thoughts would be appreciated.
Thanks....Alan

[MelanieGiles]

Alan

I do not know where your IP is coming from. The "legislation" has not changed - indeed it is creditor attitude which dictates these things and not legislation. I suggest you get a second opinion elsewhere, as you would neve be able to raise 100% of the equity, neither would your creditors expect you to!

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

[alan.p]

Thanx Melanie,

I will question their advice and may well change the IP as I need to be confident of their ability as my life would be in their hands.

Alan

[Adam Davies]

Alan
Make sure that you are 100 percent happy with the equity clause,it can be a very grey area.
I wonder if your IP is asking for 100 percent of the amount that you can raise by way of remortgage an the max that you will be able to borrow in an IVA will be 85 percent of your house value.So if your house is worth 150k by year 4 you would need to try and raise a mortgage for £127500 and pay over to your IP the amount left over once the original mortgage is settled.
As Melanie states it would be impossible to raise 100 percent equity unless you sold.
Regards


Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[alan.p]

Hello Andy, thanx for your response.
I will give you a few more details.
A proposal was drafted which included our house value at £160k with mortgage outstanding of £135k this left £1k to be introduced at the end of year 4(using the 85% rule). This proposal was witheld as we had mortgage arrears of £4k and a repossession hearing pending. We borrowed from a family member and repaid the arrears thus reducing the mort bal to £131k and stopping the repossession but the IP's assistant rang me only 3 days ago saying they were redrafting the proposal but because of a change in legislation the amount required from remortgage at the end of year 4 would be £29k ie 100% and not 85%,and that this would increase the dividend from 36% to 93%. As you can see I am a bit confused. Nothing has gone to court yet regarding the revised proposal. I tried ringing the IP today but they are closed.Is it too late for me to change IP?

Made mistakes and paying the price!!!

[Adam Davies]

Hi
If you can get a set figure,i;e the 29k written into your proposal then it,s not as bad as it sounds.House prices will most probably rise in five years and this will enable you to remortgage comfortably.
Most IVAs have the four year equity clause but without a set figure in £s and have to raise 85 percent of equity available with the ceiling being the total original debt plus IP fees and interest less money paid in.
Hope this makes sense
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[alan.p]

Will the remortgage amount be based on the value in 4 years or based on the valuation now or can you request a set figure of say £10k to be built into the proposal? just to clarify am I correct in that there has been no change in legislation as Melanie stated?

Made mistakes and paying the price!!!

[Adam Davies]

There is no change in legislation.There may be a change in your companies policy.
Most valuations are at year four and there is not normally a figure in £s written into the IVA.
You need to clarify your position regarding this with your IVA provider and if possible get a second opinion from another company.
regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[alan.p]

Ok Cheers.

Made mistakes and paying the price!!!

[MelanieGiles]

It is not too lat to be changing your IP if you feel that you are not getting a good service. It will not cost anything to get a second opinion. If I were looking at your case, I would be suggesting a re-mortgage based upon 85% of the value of your property during the final year of the IVA, which is generally the modification which creditors now use and was largely agreed at the recent BBA/DTI forum on IVAs. I am sure that your IP will have been aware of this.

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

[alan.p]

Thanx again Melanie,
If I have any probs I will be in touch.
Alan...

Made mistakes and paying the price!!!