Advice on an F&F offer please?

[Hampshire16]

Hi all

I was wondering if I could get some help ideally. I got myself into a financial pickle and managed to have an IVA accepted.

I'm now 9 months into my IVA having paid £215 each month not missing one.

I don't like telling my parents things so I never told them about the IVA, however I have now told my parents and although hugely disappointed they were pleased I did something about my financial pickle. My dad has offered to help, I've seen on here about a full and final payment? He is happy to pay this to get me out of the IVA.

Could someone tell me the steps needed to do this and how much I need to offer?

The IVA was for £9,650.

10x £215
50x £150

I've so far paid £1,935.

I also have a little bit of equity in my flat I live in, although not much it's £6,800.

Do they take this into account or want more because of the equity ?

The estimated dividend was 26p/ £

Many thanks in advance

[Foggy]

So you have 51 payments at £150 (currently) to make ( one still being at the higher rate). With over £5k equity there will probably be an extension of 12 months to address equity. So let's say 62 @ 150 = 9300. If you can satisfy them equity will be below £5k then the 12 months extra will not apply. Check your equity release clause to see how they work it out ( different firms do this differently) making the amount £7500 -- so a worthwhile saving!

You need to write to the IP saying you wish to make a F&F offer ( do not say settlement -- a different and more expensive animal) with third party funds. Say that the funds will only be available for the F&F and, if the offer is rejected, will be retained by the third party.

They will want proof of availability of the funds and source for money laundering requirements.

So -- with equity I would suggest £8,000 - £8,500 and without £6,000 - £6,500. Of course the nearer the full amount outstanding the better the chances --- we often round the figure down because both creditors and IP will be saving a fair sum in administration costs by shaving 4 or 5 years off the term.

Be aware though --- although the IVA would be ended your credit record will still be shot for the 6 years from the start of the arrangement.

[Hampshire16]

Sorry for sounding dumb, i know the equity is currently included in the IVA but if there is an offer to finish the IVA I don't see why the offer is 8000-8500? There is only 8000 ish left now. Would 5 or 6k be successful?

[Foggy]

What is actually left is the sum of the remaining payments, which could increase as your disposable income increases. You have 50 payments left, plus a possible 12 for equity --- that, at 150 a payment is over £9k, which is the sum your creditors are looking to collect in the normal course of the arrangement.

[Lisa Thomas]

I agree with Foggy's advice.

The key here will be the equity.

How have you arrived at £6,800?

Perhaps get a new valuaiton and see if you can show it is less than £5k (on the assumption you have the standard £5k minimum equity clause) in which case the extra 12 months payments will not apply and you can offer a lower lump sum.

[Hampshire16]

Hi

That's how much I've paid so far so assumed that was the amount.

Or is equity the amount left on the mortgage including interest?

[Lisa Thomas]

Hi

I's neither of those things.

The equity in your home can be calculated in different ways - you will need to check your proposals to see what formula was used but very loosely it's the amount you would receive if you sold your property, if any.

Roughly this would be the amount it is valued at, less any total mortgage and charges against the property however check your terms to see what formula you should be using.

For example if the property is valued at £100k and you owe £60k against a mortgage the equity is £40k. If it's jointly owned 50:50 then your interest would be half of this at £20k.

This is purely ball park formula only so you understand it.

Sometimes the formula will want you to calculate 85% LTV.

I don't want to confuse you with this so am showing you how to calculate it in very very simple terms.

[Hampshire16]

Hi

I've looked on my proposed voluntary arrangement. The comparison of estimated outcomes.

Under the bankruptcy column it says 6,100 equity available. 85% LTV.

But then in the voluntary arrangement column it's not included.

Then on the estimated statement of affairs it lists the assets.. of which is my flat, with equity available at 6,100. How have they worked this out?

Thanks again

[Foggy]

The estimated outcomes is not relevant to how they will calculate equity -- the 85% LTV is the usual method and is the one they deem used in BR. However, you need to look specifically at your equity release clause in the body of the proposal --- it should contain some reference to the method they intend to use, maybe with a sample calculation (in an annex) or reference to annex 6 or 7 of standard Ts & Cs.

[Hampshire16]

Hello

Sorry for the delay in replying, have checked the body of the proposal it reads:

' Six months prior to the expiry date of the IVA there should be an attempt to release home equity. However where I am unable to obtain a remortgage, the IVA should instead be extended by upto 12 months.

The amount of equity to be released will be based upon affordability from income and will leave me with at least 15% of the equity in the property. Where it is appropriate to remortgage the property through a repayment mortgage, the specific limits will be:

* remortgages would be maximum of 85% loan to value.

* the incremental cost of the remortgage will not exceed 50% of the monthly contribution.

* there will be a cap on the total equity release to not exceed 100% of the remaining outstanding debt.

If the amount of equity available in the home at month 54 us under 5k, it does not have to be released and there would be no adjustment to the IVA term. '


So the property is worth approx 115k. I own 25% of it. With 22k left on my mortgage.

Thoughts on the figure for the F&F offer?

Many thanks in advance again!

[Foggy]

If the property is valued at £115k -- your share is worth £28750. You owe £22k, so the equity will trip the £5k and an extension will probably apply. Is is a shared ownership with a housing association? If so, they would probably not allow a remortgage anyway.

[Hampshire16]

Hi Foggy

Thanks for the quick reply! Yes it's with radian housing. It is a shared ownership property.

[Hampshire16]

So what would you suggest as an offer? Would £7,500 be successful?

[Foggy]

So what would you suggest as an offer? Would £7,500 be successful?

It might be, although I would think it might be pushing it a little -- that said I have seen low offers accepted ( they will be saving admin costs). As originally suggested, I would say £8,000 - £8500.

[Lisa Thomas]

W|here did the valuaiton of £115k come from - are you able to get a lower one to challenge?

Where did the balance of £22k come from - did you ask for a redemption statement, which will include any termination penalties and interest making the figure higher and your equity lower?