Hi, I have 2 properties (mortgaged) both now rented, have moved back home to my parents because I am unable to afford 2nd one on my own. I have negitive equity in the first one but have about 20k in the second one, although it's being rented out I'm in a 12 mth rental contract, I'm not making any profit and will be unable to sell with the current market trends.
I am 19k in unsecured debts and have been contacted about an IVA. It sounds good as I'm having trouble meeting the monthly repayments. I lost my job and took a much lower paid one resulting in this debt.
My question is even though I'm about to enter the IVA costing £257 pm which is affordable, what is the maximum they can take from equity in my house at end? or can they take it all, which I think would be pointless doing the IVA only to have all my equity taken. If thats the case I may as well go bancrupt and save myself the 5 yearly payments as they would have been paid over and above.
At the moment the property with the equity in is loosing me money but i'm seeing it as a long term investmant. Re-mortageing for the IVA in 5 yrs would mean I'll be loosing even more money on a monthly basis, can anyone advise me please?
If you have equity of £20k, and debts of only £19k you may find it difficult to propose an IVA. With such low debts, and given that an IVA may well affect the properties, you could be better off looking into a Debt Management Programme and wait and see if the property market improves over the next couple of year.
The key will be not to borrow any more money, and try to live within budget for a couple of years, if your rents received equate to the mortgages and costs of running the two properties.
If you do decide to go ahead with the IVA, and it is accepted by creditors, given that you do not live in either of the properties, I would anticipate that you will be asked to sell them, in which case (as you say) bankruptcy could well be another angle to explore.
What advice has your IP given you about each option as a matter of interest?
The maximum of equity in your house at end is no more than 85% of your equitable interest. Whilst you have a notional £1k surplus over your debts this presumably is before any costs of sale etc - hence you are insolvent. Your 85% equitable interest in any event at end of IVA if released by way of re-mortgage cannot exceed 85% of the LTV.
Regards, David Mond, Insolvency Practitioner for over 46 years. Personal Insolvency Practitioner of the year 2012, Personal Insolvency Practitioner of the year finalist 2013 & 2014 awarded by Insolvency & Rescue Magazine and 2015 finalist for Personal Insolvency Firm of the Year.
"At the moment the property with the equity in is loosing me money but i'm seeing it as a long term investmant. Re-mortageing for the IVA in 5 yrs would mean I'll be loosing even more money on a monthly basis, can anyone advise me please?"
I am surprised that an IVA has been recommended.If you are having to bridge a shortfall then I would guess that creditors will insist that the property is sold and the equity used to repay part or all of the debt.
Regards
I am not too sure - If the current value of the property is such that it is reducing in value (which it might do in the short term) then there may be an advantage to see what the position is in funding the shortfall on the two lets and comparing what can and cannot be afforded. Need full details of everything and living costs and income to establish the appropriate advice.
Last edited by David Mond on Wed Oct 29, 2008 12:36 am, edited 1 time in total.
Regards, David Mond, Insolvency Practitioner for over 46 years. Personal Insolvency Practitioner of the year 2012, Personal Insolvency Practitioner of the year finalist 2013 & 2014 awarded by Insolvency & Rescue Magazine and 2015 finalist for Personal Insolvency Firm of the Year.
