My IVA is due to end next month. The creditors are now asking about the equity in my house. I am being forced to take out a secured loan against the equity, I do not know why.
If there is equity you will usually have committed to make an attempt to release some. Normally a remortgage is the chosen route but this is almost impossible so a secured loan is an alternative. However it is possible that you could have your IVA extended rather than take the secured loan but it depends on the conditions of your IVA. You need to speak to your IP and find out what your actual obligations are.
Look at your original proposals and modificaitons. They almost definately would have contained a clause to say that you would remortgage the property to inject the equity into your IVA towards the end and if you were not able to do so (most likely) then you would extend your IVA for a further year in lieu of that equity. The starting point might be to challenge the equity figures your IP is using. There's usually a minimum of £5k so if you can prove/challenge the valuation to show it's less than that then the extension may no apply to you.
Odds are you don't have to do a secured loan as those rules only come in in 2014, you're IVA was taken long before that and so unless you agreed to them you are most likely not bound by the 2014 protocols which talk about secured loans as another vehicle for releasing equity, more than likely if you reach the £5k per head with relevant LTV taken into account you might have to do another year at worst case, but likely not a secured loan, check my blog topics for discussion on this.
My Blog details, the route I took before IVA, how I choose my firm, equity release advice (year 4-5), challenging the CRA's keeping IVA on credit file once gone from insolvency register
IVA ended August 2015. Would recommend McCambridge Duffy
My Blog details, the route I took before IVA, how I choose my firm, equity release advice (year 4-5), challenging the CRA's keeping IVA on credit file once gone from insolvency register
IVA ended August 2015. Would recommend McCambridge Duffy
I feel that they have to deal with the equity but how is another matter. In general it used to be a years extention in lieu of equity but of late the secured loan has reared it's head. I certainly would not be happy with that.
IVA final payment left the bank on the 26th January 2013...looking forward to a debt free future.
I wouldn't have done that route either - thankfully mine was just the extra year.
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
Given that remortgages are effectively impossible to get the equity has to be addressed in some shape or fashion. Creditors are already rejecting proposals where there is substantial equity because they know that what is illustrated by way of a remortgage is effectively 'Pie in the Sky'.
I personally believe that the secured loan option is a reasonable one provided it runs in conjunction with the existing mortgage and the repayments are capped at 50% of the IVA payments. Had the new protocol not introduced this option there was a real danger of a great number of IVAs being rejected and people being left in unending DMPs or facing bankruptcy. In a DMP the creditors can secure the debt anyway and the repayments last for a lifetime so a secured loan must be preferable to that.
We have not incorporated the secured loan into our proposals as yet but it may well be the case that it is included by way of modification or the IVAs rejected.
Would you look at this proposition if your client already had a secured loan in addition to a mortgage?
I had a second mortgage and a secured loan so any other would effectively have been fourth in line!!
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
If the existing secured loan could have been replaced with a cheaper one then certainly it could have been an option. Most secured loan companies want to be second charge holder and will not advance any money unless they are. Therefore had you been able to borrow enough to clear your secured loan at a lower APR than you were currently paying then I am sure a financial adviser would recommend this. If the new loan was a higher APR then there would be no justification for doing this and the loan application would not proceed.
I am not a financial adviser so what I am saying is only my opinion but I do know that Shaun from Select has managed to secure funds for people in IVAs cheaper than the rate they were currently paying. I believe in more than one case the reduction in the APR meant he could raise enough funds to clear the loan and the IVA without increasing the actual term or the monthly payment.
I suppose each case has to be looked at individually but I am sure you would have been happy with that type of a deal!
I doubt it would have happened then - my mortgage provider had first and second charge (thanks to HSBC who wouldn't help me out) and then we used Black Horse (via Ocean Finance) who were happy to take third place. When it came to remortgage time then neither of them would touch us, even though we had a lot of equity.
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
You are probably right and an extension was always going to be the case. However, given that HSBC would only really have one charge it is possible that a secured loan company would have been prepared to clear Black Horse and the IVA. If that was the case then it would have come down to APR and would this be saving you money.
Sorry Michael - bit of confusion here. Mortgages were both with the Chelsea as when we asked HSBC for help they told us to remortgage so we could pay them off (not that we did) and the third charge was with Black Horse, now thankfully paid off!!
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
