Tuesday 7th of July 2009
Many homeowners in the UK may now owe more money than their property is worth, although taking on board individual voluntary arrangement (IVA) advice could help clear other financial commitments such as personal loans.
Pointing to recent figures by ratings agency Fitch, MSN Money said almost one in six prime UK mortgages are now in negative equity.
Many homeowners who have managed to stay in the black could be pushed into debt if they end up in this situation. However, an IVA could help them stay on top of their personal loan repayments, allowing more cash to be put towards a mortgage.
"Lenders won’t let you remortgage to them if you are in negative equity. Maximum loan to values are 95 per cent of the property value, although some lenders won’t even go this high," Melanie Bien, director at mortgage broker Savills Private Finance, told the publication.
Rather than attempt to remortgage - which could push people further into debt - using an IVA to reduce interest repayments for personal loans could enable homeowners to make small overpayments on their mortgages.
A recent report from the Bank of England revealed that many lenders believe a larger proportion of borrowers will begin to default on their unsecured loan payments.
- House price rise 'may not indicate recovery'
- Equity release 'needs to be increased'
- Need for IVA help could increase as expert predicts reduction in lending
- Government announces 'breathing space' for those needing IVA help
- Lack of subprime lending creating need for IVA help, expert suggests
- IVAs could tackle the average 21k debt of households with unsecured loans
