My mother has an IVA which has about 18 months to run. She and my Dad still have an interest only mortgage which needs to be paid at the end of this year. Their ages mean that it is impossible to get an extension on the mortgage (both are 70 plus) and they have no savings at all with which to pay it. If my sister and I were to loan the money to our parents to pay the mortgage, would this affect the IVA? This would essentially be given as a loan and as such want some sort of guarantee that we can get it back but – is it possible to get some sort of legally binding guarantee against the house to ensure this happens at some future date?
Dad has offered to sign over his share of the house to us once the mortgage is paid in return for this loan but one of the creditors in the IVA has secured a charging order on the house against my Dad (that loan was in joint names). We are therefore not sure whether this will be possible as both the IVA and these creditors will have to be notified of any transfer of title deeds and I am certain will block this. Another option would be for us to buy the house outright and give our parents the funds to clear the mortgage, charging order and equity release required as part of the IVA next year. Would the IVA allow us to purchase the house for the total of all these or would they want it sold at the market value in order to maximise their return? Mum’s IVA stipulates both a figure to be released based on current market value but it also mentions it as 85% of her equity based on current market value so not sure which to go for? Alternatively, if we paid just the charging order and mortgage would Dad then be free to sign over his share of the house?
It is a bit of a mess so any advice would be very helpful.
This is a difficult one I guess, what provisions were in place at the beginning of the IVA as obviously it would have been known then that the mortgage would have been due to be repaid in full prior to the end of the IVA?
That said, they are where they are, if you repaid the mortgage in full it is likely that the IVA would be extended beyond the 5 years as your parents would now have 'equity', or they could even require them to take out another loan against the house to repay into the iva (although now sure if this would be feasible due to their ages)
I guess you need to tackle this now and speak to their IP to find out what their advice is, you are right in that you won't be able to pay off their mortgage and sign the house into your name as there will be a restriction on it currently to stop this happening.
I don't see any difficult with the IVA if you and your sister were to provide funds to clear your parent's mortgage. You would then take a charge over the property, and effectively become first charge holders in priority to the charging order, is it then the intent for your parents to continue to pay the current amount payable to the mortgagee, to you whilst they remain in occupation of the property?
Thank you for the replies, I really appreciate the comments as we have been going round and round on this one with the best way to tackle it. Melanie - how do we go about getting a 'charge over the property' as this option does seem the easiest as it will have the least impact on Mum's IVA as the intention is that they would pay the same amount as they currently do on the mortgage but to us instead.
The best thing to do would be to appoint a solicitor to draw up a legal agreement for you all to sign. This is a fairly easy process, but you do need to make sure that all of the legal angles are covered to prevent any disputes between any of you in the future.
None of this could proceed without consent from the IP as there is almost certainly a restriction against the property. If you are buying it for below market value and there is nothing paid into the IVA [pot] creditors would need to give approval which they may well do.
It may be best to raise enough to clear the mortgage, secured loan and offer a full and final settlement to the IVA as creditors may be happy to get their money now and let your parents move on.
