Posted: Fri Jul 06, 2007 8:00 pm
Hi All
I was reading the paper today and there was an article related to the interest rate rise and experts were saying that there was a possibility that property prices might fall and repossessions would increase. How would the issue of negative equity be addressed at year 4 in this scenario or do IVA's with this clause already have an alternative - e.g. 12 extra payments - built in to the contract.
If somebody with a mortgage that has risen because base rate is say 6.5% has had to reduce payments to the IVA following an updated I/E breakdown and then has no equity to release could they be feasibly 2-3 years into the IVA then have it fail due to not delivering the expected dividend.
Catcullus was making this point before going on holiday regarding people being reluctant to sell their property and rent, instead choosing to soldier on. But this could end up with the very thing you were trying to protect i.e. the family home, being taken from you anyway because of the IVA failing and people declaring themselves BR.
The other point I would like to make is that in year 4 you may be able to re mortgage for any equity but then you would be making additional payments for the equity amount at a possibly much higher rate than now from a sub-prime lender which means your IVA might be finished but your disposable income will be about the same post IVA as whilst in it and this will be for the remainder of the mortgage.
I should point out that I am no expert when it comes to the economy and interest rates and I appreciate that others will be able to use an equity release to end their IVA early (like Andy) but enough people post on here that they dont understand the year 4 equity release clause and I feel that not only is it important to understand that it will happen but people should realise how much this might cost and for how long it will effect them post IVA.
Regards
Dave
I was reading the paper today and there was an article related to the interest rate rise and experts were saying that there was a possibility that property prices might fall and repossessions would increase. How would the issue of negative equity be addressed at year 4 in this scenario or do IVA's with this clause already have an alternative - e.g. 12 extra payments - built in to the contract.
If somebody with a mortgage that has risen because base rate is say 6.5% has had to reduce payments to the IVA following an updated I/E breakdown and then has no equity to release could they be feasibly 2-3 years into the IVA then have it fail due to not delivering the expected dividend.
Catcullus was making this point before going on holiday regarding people being reluctant to sell their property and rent, instead choosing to soldier on. But this could end up with the very thing you were trying to protect i.e. the family home, being taken from you anyway because of the IVA failing and people declaring themselves BR.
The other point I would like to make is that in year 4 you may be able to re mortgage for any equity but then you would be making additional payments for the equity amount at a possibly much higher rate than now from a sub-prime lender which means your IVA might be finished but your disposable income will be about the same post IVA as whilst in it and this will be for the remainder of the mortgage.
I should point out that I am no expert when it comes to the economy and interest rates and I appreciate that others will be able to use an equity release to end their IVA early (like Andy) but enough people post on here that they dont understand the year 4 equity release clause and I feel that not only is it important to understand that it will happen but people should realise how much this might cost and for how long it will effect them post IVA.
Regards
Dave