What it would take for an early settlement offer?

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paul362
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by paul362 » Mon Aug 07, 2017 9:13 am
Hi, I'm now 6 months into my 4th year of my IVA plan. We pay £445 a month into the plan so £5340 per year.

I own my house. We have a mortgage of £325000 and the house is now worth approx £520000. Chances of any remortgage at the end of the 5th year V slim plus other circumstances in the IVA contract mean its more likely we'll be asked to continue into a 6th year of the IVA.

I was thinking about what it would take for an early settlement offer at the point we enter the 5th year. I get an on target bonus of £6400 every April which I pay 50% above 10% into the plan. If we were to offer the whole of my bonus plus find a bit more from family would that get accepted for early closure at this point? Say we offered 7k to finish it do you think that would get accepted bearing in mind it would be the 5th year. Would an offer of even less than that get accepted? Possibly?

Just looking for some advice here as I'd like to get this thing closed off! :)
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Foggy
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by Foggy » Mon Aug 07, 2017 9:41 am
Hi --- first .. do not use the term "settlement". That means to pay off the original debt, fees and possible statutory interest. What you are doing is making a "Full and Final Offer".

At the point you intent to make the offer you will owe ( assuming the extension) 24 months at £445, so £10680. I would say an offer in the region of £8k, maybe a little more. A lower offer could get accepted, but creditors are difficult to predict.
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Michael Peoples
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by Michael Peoples » Mon Aug 07, 2017 10:12 am
In addition to the monthly payments it appears creditors get half your bonus too which means they would receive nearly £6,000 for years five and if extended year six. As Foggy says creditors are unpredictable but if they realise how much they would get by leaving the case open they may hold out for nearer to £15,000. In addition, if your proposal mentions a secured loan or a remortgage then there is potential for a substantial equity release as you would have £222.50 each month to fund the repayments being half your IVA contribution.
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paul362
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by paul362 » Mon Aug 07, 2017 11:04 am
Thanks for the response.

I'm a little confused by the last response of a full and final settlement of 15k. Seems a lot when I'll have just over 10k remaining if we see out the 6 years?!

The remortgage clause in the contract states amount to be released will not exceed 85% LTV. Nor will it exceed 100% of my share of equity or payment in full of my remaining outstanding debt. Incremental costs of the remortgage shall not exceed 50% of my monthly contributions at the time of the remortgage is obtained.

Lets say the LTV is just over 60% in 2018. I'm currently on an interest only mortgage and pay £1284 per month. If I was to remortgage then I'd want to go for a repayment mortgage which would likely mean an increase over the 50% of the £445 I pay into the IVA. Plus the chance of anyone actually giving us a mortgage would be zero I suspect.

Have I understood this right?
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Michael Peoples
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by Michael Peoples » Mon Aug 07, 2017 11:17 am
You have read this right and an extension does seem likely as a remortgage would be difficult if not impossible. My figure of £15k is based on the monthly payments plus the bonus monies which you bring in. If you have been paying half your bonus each year on top of the monthly payments then creditors may get in excess of £15k if they let the IVA run its course.

Does this make sense?
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paul362
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by paul362 » Mon Aug 07, 2017 12:15 pm
Yep that does make sense to me. Cheers for that information!

The only other thing I'd like to ask... When we do actually get to the end of this agreement; I think I have to wait a while before we get the certificate right?

How long should I wait before I go for a remortgage and any tips for starting to build up credit rating again quickly so that we are in a good position to actually get a remortgage? I'll be 40/41 at this point and would like to go for a 25 year mortgage or even higher if possible.
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Foggy
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by Foggy » Mon Aug 07, 2017 12:54 pm
paul362 wrote:
Yep that does make sense to me. Cheers for that information!

The only other thing I'd like to ask... When we do actually get to the end of this agreement; I think I have to wait a while before we get the certificate right?

How long should I wait before I go for a remortgage and any tips for starting to build up credit rating again quickly so that we are in a good position to actually get a remortgage? I'll be 40/41 at this point and would like to go for a 25 year mortgage or even higher if possible.



Have a read here:

https://www.iva.co.uk/what-does-an-iva- ... dit-record

And also the last couple of entries on my blog ( link in my signature block below). It can take up to 6 months for the certificate to be issued and three months from that date to come off the Insolvency Register. However, the IVA will remainon file for 6 years from the start.
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Michael Peoples
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by Michael Peoples » Mon Aug 07, 2017 1:07 pm
If the IVA is extended your credit file should be clear by the time the IVA is completed. However as Foggy rightly points out some firms are slow at sending out completion certificates and even after this the register still records your name for up to three months. If you can manage an early settlement your name could be off the register before the six years are up so that would be helpful to you.

It appears that you are paying around 4.74% which does seem quite high so I can understand why you are looking to remortgage. You could approach your existing lender now to see if they will give you a better deal at least until you are in a position to move to a new lender. No harm in asking. I would suggest too that when you are thinking of remortgaging it may be worth speaking to a specialist broker such as Shaun Vickery from Select who posts here or Ryan as some companies are more welcoming to ex-IVAers than others.
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Kazza
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by Kazza » Mon Aug 07, 2017 3:11 pm
We're with the Coventry Building society and out of the IVA for almost a year but credit still shot until 2018 (who cares though right!) and back in February this year we moved over from interest only to repayment, but we're on a fixed rate of 4.15% until 30/09/17. We were paying £600 per month on interest only but now pay £1076 on repayment and our new term is 18 years. I have also managed to reserve a 10 year fixed deal at 2.39% which will start on 1st Oct this year and as we're used to paying the £1076 now, we agreed to continue at this level and once the new deal kicks in our loan term time has been reduced to 16 years! Coventry have been so accommodating to say the least. As we did use to pay nearer side of £1300 to the IVA each month (+£600 to the mortgage) I may still overpay a little to the mortgage all the while we can afford it. So my point is, not all lenders turn you away. We have had no different treatment as existing customers - the only thing being we can't borrow more - but again why would you even want to! Good luck. Life is sweet these days, debt free, mortgage finally coming down, modest savings in the bank and still rarely pay full price for anything!! :D
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Michael Peoples
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by Michael Peoples » Mon Aug 07, 2017 3:39 pm
That is a great post Kazza and will certainly help others who may see no light at the end of the tunnel.
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Kazza
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by Kazza » Mon Aug 07, 2017 3:52 pm
Thanks Michael. It was your help / advice that got my completion certificate moving along! - so I'll be ever grateful to you for that. I've had no problems what so ever since completion and still being insolvent! Happy days!Thanks again Michael :D
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paul362
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by paul362 » Mon Aug 07, 2017 5:08 pm
Nice one Kazza! good to hear that! positive outcome for you no doubt and proves there is light at the end of the IVA tunnel! :)

Just got to stick this out! hoping we can work out an early closure!
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Kazza
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by Kazza » Mon Aug 07, 2017 5:53 pm
Absolutely Paul. It was husbands redundancy last year that lead to our F&F! Distressing times back then (he did NOT like his new job for the first few months!) but stuck with it, F&F accepted and a year on we're both earning more (and no sharing pay increases + tons of OT!!) and life is fantastic. And as said that's still being insolvent - which I couldn't give a hoot about.There is light - I'm (along with many many others) are living proof of that. Good luck - whatever happens whenever it happens you will be debt free and able to move forward. :D
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