remortgaging in an IVA?

[randa]

Hi

I wonder if anyone can help me. We are in debt by approx £42,000. We are seriously considering an IVA but my fixed rate with NR comes up in December. The LTV is about 85%. I am worried that when we come to remortgage, we will not be able to find a lender who will take us if we are in an IVA agreement - or that if we do the rate will be shocking. Can anyone give me some advice?
Many thanks.

[Andrew Graveson]

Hello Randa,

Northern Rock are seeking to reduce their mortgage book by 50%. For this reason they are unlikely to offer a competitive rate to anyone who has an existing mortgage with them which soon ends.

A NR client I spoke with today has their fixed term ending in May and have been offered 7.9% afterwards (albeit with a very responsible recommendation by NR to seek advice from a financial advisor - they are not pretending that the rate is competitive).

Today (availability dependent upon unique personal circumstances) there are lenders who will lend up to 90% to those in IVA's.

The mortgage market is in a huge state of flux however. Six months ago through my mortgage sourcing system I had access to around 10000 mortgage products from around 100 lenders. Today that was less than 4000 from 84 lenders.

Rates are getting changed (generally increased) and criteria tightened up almost daily.

I think you must have a Plan B in place in case you cannot remortgage in December. What would your mortgage cost be if you moved to your lenders standard variable rate? Would you be able to continue to contribute to an IVA.

Responsible IP's (who you will find on this site) are factoring this into IVA proposals so it would be worth talking this through in advance with any IP you decide to ask to represent you.

Melanie Giles and I have discussed this issue in the past and I know she is keeping this top of mind when considering new cases.

[Welsh Boy]

randa

The critical thing(s) for anyone in an IVA or with IVA on their credit profile and looking to take out remortgage finance are:

Permission from your IP- The IVA needs to have been "conducted satisfactorily"- Your present mortgage should hopefully show no missed payments within the last year and certainly no missed payments when you are attempting to re-mortgage. There are lenders out there who at present will lend to those who meet the above criteria along with other factors i.e. affordability etc. The rate would reflect your own particular circumstance.

The marketplace is changing so much at present so what is available come December would be in my opinion pure speculation.

Hope this helps. Tony

[Adam Davies]

hI
You may be better to hold fire until your fixed rate comes to an end,if you can,and then fix again before seeking an IVA.
The other option is for your IP to factor into your IVA a payment reduction for when your fixed rate comes to an end,however this may make your payments not viable fo an IVA.
Do you have unsecured borrowing with NR ?
Regards

[MelanieGiles]

That rate is scary Andrew, and very topical as I have been having discussions with clients tonight whose mortgage is due to increase in November 2009 with Northern Rock and they are currently on interest only with 92% LTV. On the assumption that they will not be able to find a similar product due to LTV issues, this makes what on the face of it a reasonable IVA unworkable.

I am having to turn more and more people towards debt management as a solution, where they are property owners and will not consider bankruptcy. One wonders where all of this leads to?

[Andrew Graveson]

We're actually not too far away from the point (another couple of lenders withdrawing from the IVA market) at which many people would be better off on the SVR of their existing lender rather than remortgaging.

The implications are really significant.

Those who are contemplating trying to pay off as much of their debt as they can (via an IVA) but who face significant mortgage payment increases in IVA's in the future may conclude they're better off going bankrupt. Not good all around.

Those in IVA's may be forced to exit via bankruptcy if they cannot maintain a monthly payment to the IVA following a mortgage payment increase. Again, everyone loses.

The bitter irony is that one of the prime motivators for people to choose an IVA over bankruptcy is to protect the family home. This creates a group of people in the UK who are amongst the very most motivated to make their mortgage payment on time every month. They have also had their income and expenditure reviewed with the assistance of highly trained, experienced, and regulated IP's to ensure that they can meet their mortgage and IVA repayments. They also have no unsecured debt repayments to challenge their ability to make mortgage payments.

It must be a terrible time to be a mortgage lender balancing the risks in a market that has made life very difficult for them. However it does seem that a canny lender that decided to make reasonable products available to those in IVA's could do very well right now in this unique niche whilst offering their clients a fair deal at the same time.

I wonder if a couple of smart lenders will take the time to understand the unique dynamic evident amongst IVA mortgage-borrowers rather than mixing the scenario up amongst the general sub-prime malaise?

[angela18]

My mortgage isnt with NR but C&G, but this still makes this quite worrying reading, for us just starting down the IVA route!! Its quite scary really

[randa]

Thanks for all your replies.

I do have unsecured borrowing with NR ubfortunately, I think I have pretty much figured that in December if we go down the IVA route I will defintately have to leave NR.

But you say that the IP will take my increasing mortgage payments into consideration when looking at monthly payments?

I am really scared that if we get an IVA we may end up in even more trouble than just trying to muddle through on our own.

[CoverItAll]

Andrew,

You say "I wonder if a couple of smart lenders will take the time to understand the unique dynamic evident amongst IVA mortgage-borrowers rather than mixing the scenario up amongst the general sub-prime malaise? "

I thoroughly agree.

As you know, I have been working on just this for several months, tying to poersuade Lenders to think logically ! Unfortrunately, whilst I was able to bring Protect IVA to market after 18 months' development, I fear that this will take much longer.

[size5]

Sounds to me as if this scenario could fall into the category of a DMP first to at least stop the borrowing cycle, followed by the possibility of an IVA later on.
The danger in trying to hold fire is that further debt is very likely to be run up in the interim period so a higher payment may be needed to fund an IVA, this may of course not then be possible due to an increase in mortgage costs. Certainly there are no easy answers.