Paying Off IVA Four Years Early

[xopo99]

Only a year has passed since I entered my IVA, but the price of my property has risen considerably and I feel if I remortgage it I may be able to pay off the IVA early. There was no equity on the property when I first entered the agreement.

The only thing that concerns me is that the Mortgage Provider added a clause that I should try and remortgage after four years anyway.

Would this put the blocks on my idea, or is this worth looking into further?

Thanks in advance.

[catullus]

Hello xopo99

Logically there is no particular reason why the creditors should accept a F&F offer from you now because you are already committe to doing this in year 4.

In their eyes they will get three more years worth of contributions from you AND the equity that you'll need to release. They are also likely to take the view that the property will be worth even more in year 4 than it is now, meaning more money for them.

The only realistic way that a F&F settlement could work for you now would be if you could demonstrate that through a change in circumstances you are unlikely to complete the IVA but are now in a position to remortgage.

In your circumstances I would think that would be very difficult to do.

[MelanieGiles]

Do you mean that the Mortgage Provider has a 4th year clause or that this is provision of your IVA - possibly as modified by creditors? If the latter (and I assume that this is the case) Catullus is confirming current creditor attitude - but you should check with your own IP to see if they think it is a viable option.

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

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[xopo99]

This was a clause added by the mortgage provider (all other creditors were happy to go along with the proposal before this), but my IP advised that I may not be able to do this when the time comes as my financial circumstances may not allow it.

Oh well, four more years of gloom it is then.

[MelanieGiles]

Sorry - I still don't understand why your mortgage provider would have had any influence in your IVA? Can you explain further please. Was there perhaps a mortgage shortfall which was included in the IVA as an unsecured creditors, therefore giving your mortgage provider the right to vote for the unsecured portion?

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

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[mikebdomain]

Are you currently on an interest only mortgage? If so, it sounds like what you are refering to is an exit route suggested in a suitability letter by your mortgage advisor.

What lender are you with?

What is the wording of the clause?

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Specialising in adverse credit.

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[xopo99]

Sorry, forgot to mention that I had the together option with my mortgage (northern rock), so the loan from that is part of my iva.
Don't have the wording of the clause to hand at the moment.

[Adam Davies]

Hi
Yes it makes sense now.NR have put a modification into your IVA for a fourth year equity release.
I doubt if they would be intersted in an early settlement as they will probably get a bigger chunk by waiting until the fourth year.
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

[xopo99]

There isn't anything in the agreement which mentions how much they will be able to take from remortgaging. Will this be split amongst the other creditors and how much should I expect them to be looking for (% of original debt on top of 35p in the pound which I am currently paying back).

Thanks again.

[mikebdomain]

Northern Rock together product is 125% borrowing on your property with 90% secured and upto 35% unsecured. The unsecured portion is lent on the same interest rate as the secured portion making the borrowing a cheaper option than a secured loan or credit cards. Once the secured portion is redeemed the unsecured portion reverts to their standard rate (normally twice as much).

IF you were to redeem your mortgage (by remortgaging with another lender)I suspect the only early settlement NR will be interested in would 100p in the £.

I would suggest confirming the valuation of your property, then speak to a mortgage advisor who will carry out a full fact find to ensure remortging is a viable option, including looking into future affordability issues. Then IF it all looks good, talk to your IP about permission to remortgage along with an offer for a full and final settlement.

FREE ADVICE IS THE BEST ADVICE

Mortgage Broker
Specialising in adverse credit.

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[Adam Davies]

Hi
Whatever is raised wll be split between all your creditors.
They normally ask you to release 85% of your equity,but this will be dependant on affordability.
Did your IP explain the modification to you n the day of your creditors meeting ?
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

[xopo99]

To be honest, I don't think it was explained fully to me. Not really sure what to expect after the fourth year.

[mikebdomain]

The way it works is this: you propose that in the 4th or final year of the IVA you will obtain a market valuation of the property and redemption statements on the mortgage and any further secured charges against the property. Creditors realise that it's next to impossible to get a 90-100% remortgage for a debtor in a IVA so they will settle on a remortgage up to 85% of the property's value. If the charges against the property at revaluation time are therefore less than 85% of its value you will take the remortgage offer to release the equity into the IVA, your monthly payments to the IVA will then also be reduced by the amount of any increase in payments that the remortgage has over the old mortgage.

If you cannot get a remortgage offer at that time, but equity in the property has arisen, then creditors may instead agree that the IVA continues for at most one extra year in lieu of release of equity from the property. They are only likely to agree to this though if the amount of equity release being forgone is similar to what one year's extra IVA payments would amount to.


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Specialising in adverse credit.

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[xopo99]

Makes sense now, thanks for your help.

[Adam Davies]

Hi
Well your not the first person who has not fully understood the equity release at the time that the IVA is agreed.We have dozens of cases on this forum of similar situations.
We really do need a system that ensures that this hugely important part of the IVA is fully explained and acknowledged by the debtor.
I have to say that it is really upto the IP to make sure that this provision is fully explained at the time,a two minute phone call on the day of the creditors meeting is,quite simply, not enough.
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