Mortgage Problem

[Geordie]

Congratulations on a very informative site.

Wish I had found this site before submitting IVA with Neville Eckley who have been very unhelpful, even trying to get me to sign forms that I never agreed to ( They admitted to also putting in a land registry form hoping I would sign that)

My question to the forum is in respect to what happens when I come out of a fixed rate period next year. The only answer from my IP and the answer to all my questions is "If you cannot pay the agreed amount, then bankruptcy is the only option"

I pay the minimum allowed of £220 to my IVA and anticipate a mortgage rise of £100

[catullus]

You've been badly advised, particularly if your IP knew about the impending mortgage increase and didn't factor this in to your I&E.

That having been said, if you didn't know about it either and so did not tell your IP his response will be "so how was I meant to know about it"

My staff are now instructed to enquire about arrangements on the expiry of fixed rate periods so perhaps that's your answer.

As for the future, if you are committed to paying £220 in to the IVA then that is what you will have to do unless you get the creditors to agree lower payments through a variation, but dropping IVA payments to £120 indefinitely in an IVA isn't really viable.

How much equity have you got in your house?

[Geordie]

Thanks for the reply.

there is approx £20,000 in equity but the mortgage is in joint names with my wife who is not part of the IVA.

[mikebdomain]

Hi Geordie and welcome to the forum

I would suggest talking to a mortgage broker nearer the time, chances are you will be able to remortgage and reduce your monthly payments nearer to what you are paying now. I doubt if your IP will have a problem with that…


FREE ADVICE IS THE BEST ADVICE

LEYBRIDGE LIMITED
Mortgage Broker
Specialising in adverse credit.

see feedback and testimonials at:
http://www.leybridge.com/testimonial.php
Check out my blog at:
http://mikebdomain.blogs.iva.co.uk/
Please read our Initial Disclosure Document(IDD):
http://www.leybridge.com/Leybridge-IDD.pdf

[Geordie]

I have Today spoken with my mortgage company (GMAC) to pursue other options and they advise that they will not offer preferential rates without a remortgage which mystifies me, however they may consider interest only. Will the IP have any objections? as this will ultimately reduce the equity in the property.

Thanks in advance for your reply.

[mikebdomain]

Gmac-RFC stance is quite normal - I would not suggest going interest only, the best advice I could give you is to speak to an authorised mortgage broker and discuss your options.

FREE ADVICE IS THE BEST ADVICE

LEYBRIDGE LIMITED
Mortgage Broker
Specialising in adverse credit.

see feedback and testimonials at:
http://www.leybridge.com/testimonial.php
Check out my blog at:
http://mikebdomain.blogs.iva.co.uk/
Please read our Initial Disclosure Document(IDD):
http://www.leybridge.com/Leybridge-IDD.pdf

[catullus]

Actually, interest only might not be such a bad idea.If you have a proposal that requires you to remortgage a % of your equity towards the end of the IVA then a repayment mortgage only increases the value of the equity that you will have to refinance.

I do stress however that it depends on the type of proposal you have so have a look at it and post back, if unsure.

[MelanieGiles]

Interest only is a very good idea if you are in an IVA for the very reasons Catullus mentions above, and if you are desperate to hang onto the IVA - which I assume that you will be with equity at the level you have quoted - you may have no other choice!

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[mikebdomain]

The Interest Only option, without a repayment vehicle in place, should only be considered under full advice and as one of the last resorts when all the facts are known.

Surely (hopefully) your IP was aware of the impending change in your fixed rate and would (should) have discussed this with your creditors at the time of the original arrangement…

Swapping to an Interest Only mortgage can prove to be an expensive option with all the charges some lenders levy for the service, also swapping back to repayment may not be agreed so easily by your lender due to the change in interest rates and your circumstances.

Under the circumstances you describe, I would always advocate seeking the advice of an authorised mortgage broker at least armed with all your options you may make an informed decision.


FREE ADVICE IS THE BEST ADVICE

LEYBRIDGE LIMITED
Mortgage Broker
Specialising in adverse credit.

see feedback and testimonials at:
http://www.leybridge.com/testimonial.php
Check out my blog at:
http://mikebdomain.blogs.iva.co.uk/
Please read our Initial Disclosure Document(IDD):
http://www.leybridge.com/Leybridge-IDD.pdf

[Skippy]

Sadly I think interest only mortgages will become more common due to the rises in interest rates. Dave and I are moving (hopefully!) soon, and an interest only mortgage was the only option - it would have cost another £150 per month to have a repayment mortgage. We couldn't bear the thought of staying here much longer, so we had no choice.

Yesterday is history, tomorrow is a mystery, today is the present - a gift to make the most of.

View my blog at http://skippy13.blogs.iva.co.uk/

[Welsh Boy]

The only difference between an interest only mortgage and a capital repayment is that a capital repayment will reduce the capital balance albeit on a relatively slow basis in the initial years. There are products (mortgages) out there for all of us even if you have a less than perfect credit profile to allow you to pay off a portion of your outstanding balance (mortgage) without any penalty thus giving you some control of the decreasing balance in fact if you are disciplined with your financial management they could be a good step forward. Tony

[Adam Davies]

Hi
I think under your circumstances and the strained relationship that you have with your IP I would suggest changing to an interest only mortgage and then revert back once your IVA is concluded or when, and if ,you have to remortgage due to the fourth year equity clause.
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

[mikebdomain]

As a short-term thing, quite possibly Interest Only could be a solution.

However, with an interest-only mortgage your monthly payments only cover the interest on the loan - they do not pay off the loan itself.
This is similar to renting a property off the bank in effect. The payments you make are to service the debt only. . It means equity gains will be minimal (only what the property makes by itself in the market) and leaves your with greater exposure to negative equity if the market crashes (where you owe more than its worth). Significantly, over the long run you are paying a lot more than with capital repayments. Its unlikely you will stay Interst Only for ever (normally a set period of x years), however, if it did you would theoretically end up paying for the value of the house in full - many times over.


You do seriously need to consider your current rate (albeit £100 more than you were paying on your fixed rate) If for example you had a fixed rate of 5.75% rising on reversion to Gmac-RFC’s current standard variable rate (currently 7.74%) for the remainder of the mortgage and you decided to change to Interest Only, in the current sub-prime market, you probably will not be able to achieve that rate again (in the short term at least – certainly for the remainder of your IVA) and may end up with a not unheard of rate nearer 8.5%+.

The point I am trying to make is; please do not make any decisions based on the information in any Internet forum, when considering something as important as this. Your situation and circumstances are unique to you, and as such you should always obtain independent, professional advice for your own particular situation. And then make a decision based on knowing the full facts, and having advice on the benefits and pitfalls of all the mortgage products available to you.


FREE ADVICE IS THE BEST ADVICE

LEYBRIDGE LIMITED
Mortgage Broker
Specialising in adverse credit.

see feedback and testimonials at:
http://www.leybridge.com/testimonial.php
Check out my blog at:
http://mikebdomain.blogs.iva.co.uk/
Please read our Initial Disclosure Document(IDD):
http://www.leybridge.com/Leybridge-IDD.pdf

[Welsh Boy]

Mike I feel I need to correct you on that, numerous lenders will allow a payment of up to 10% of the mortgage balance per year without any penalty. So if you have one of these products and wish to make a payment of up to 10% of the balance you may do so with the lenders blessing, indeed I am seeing many doing precisely that. Tony

[mikebdomain]

You are quite right welshboy - Gmac do an interest only product where they will allow up to 25% without penalty on an IO mortgage

FREE ADVICE IS THE BEST ADVICE

LEYBRIDGE LIMITED
Mortgage Broker
Specialising in adverse credit.

see feedback and testimonials at:
http://www.leybridge.com/testimonial.php
Check out my blog at:
http://mikebdomain.blogs.iva.co.uk/
Please read our Initial Disclosure Document(IDD):
http://www.leybridge.com/Leybridge-IDD.pdf