full & final offer by remortgaging

[rickyg33]

Today, we contacted an IVA adviser by telephone.
After explaining the circumstances as best we could, it was suggested that we raise an amount by boosting our mortgage up to 85% of our property value and the money raised would be used as a final offer to settle our debt, which would probably be about 60% of the total debt owed.

I'm just a bit wary that we'll be raising more as a 'p in the £' offer, so the creditors may well recoup more than in a monthly IVA payment agreement, but over the course of the remortgage period we'd be paying massively more and for much longer than 5 years. Also, it's likely that the total mortgaged sum would mean we'd be paying a higher than normal rate of interest, since it would be about 5 times income [normally mortgage companies work on 3 or 4 times income don't they].

Also, how does the IVA work after [if] the offer is accepted? Would it mean that we'd be free to work and gain extra income without having to worry about extra IVA payments?

[MelanieGiles]

Hi ricky

Full and final settlements based upon the raising of equity in property are difficult to get accepted these days, as the creditors basically say they would prefer to see five years worth of IVA contributions from you with the suggested equity release on top during the final year.

The only way this route is likely to be acceptable is if you are able to demonstrate that you currently have no disposable income, and that by borrowing additional monies against your house (say from moving from a repayment to an interest only mortgage) that this is in creditors' best interests as a lump sum offer is the only real way they can be repaid.

I used to do a lot of this type of IVA a couple of years ago, but creditor goalposts have changed and it is now difficult to persuade them that money in the hand now is better than a potentially higher return over a longer period.

If your IVA were to be accepted on the basis your IP firm has suggested, then I suspect that it would run for one year, during which you would not be required to make any monthly payments.

[Welsh Boy]

rickyg33

I will answer the mortgage part of the question by saying whether you are in an IVA or not the interest rate offered would depend solely on your particular circumstances.If you are struggling with commitments at present this may well be reflected in the rate when a credit search is done on you,to ascertain what products are available to you.

The other point about a higher "p in the £", I think the onus is on the IP along with you to offer the best possible return to your creditors.

I can`t offer advice on the IP side of things as I am not qualified to do so but would let you know from a mortgage point of view different lenders have different lending criteria they aren`t totally uniform.Tony

[rickyg33]

I was of the opinion that I'd be looking at a monthly payment, with an equity release in year 4.

But the advice given today [by phone] seems to be centred around raising equity through remortage at the outset, making an offer of a settlement to the creditors and that's it.

Our property is perhaps worth £220,000 plus. Current mortgage is £125,000. 85% LTV would give around the £185,000 mark so possibly raising £60,000 or so, which would be about 60% of the total debt.

I guess the advisor was considering that this would present a better prospect to the creditors and that would be acceptable. My problem is that the total amount payable over the mortgage length is a lot more than £60,000.

rickyg

[MelanieGiles]

And the creditors problem will be agreeing to this now, when they could have five years worth of payments from you and the same equity release in five years time.

Which firm is advising you, and is the IVA just for you or you and your partner?

[rickyg33]

This was through the IVA.co.uk helpline phone.

I wanted [see previous posts] to keep the IVA in my name only, since they're all my debts and my wife has no income.

The advisor on the phone insisted that the IVA should be in both names and that [probably] the only way would be to raise equity ASAP and make an offer to the creditors. I can see where you're coming from about the creditors taking 4 years of payments then an equity injection.

He seemed to point toward raising about 26% of the debt through equity release and that should do it.

[MelanieGiles]

Without knowing all of the facts of your case Ricky, it is difficult to advise, but could you confirm exactly how much you and your wife both owe and what your current combined disposable income amounts to. Given that you are being advised to raise an additional £60k, I am assuming that you have a reasonable disposable income available to offer to creditors.

[rickyg33]

Disposable income [after deductions as per the CCCS guidelines] would be about £400 per month.

[MelanieGiles]

So your current advisor is offering a £60k return from an equity release which - assuming that the additional re-mortgage repayments will be no more than £400 would give creditors a return of 60% (before costs)

In the alternative, you pay 54 months contributions of £400 equalling £21,600 plus an equity release on top of that which would provide a return of approximately 80% (before costs).

Now you can probably see where I am coming from.