Introduction

I’m back after a break from my Blog with an open letter to my Mortgage provider. I hope to highlight a specific niggle I had during my Individual Voluntary Arrangement (IVA). I hope to draw light on one of the potential consequences, that being in Debt costs more.

To those thinking about an IVA I’d just say this is something to think about, but irrespective, an IVA still got me out of problem debt so it may still be the right option for you. Look to the free debt advice providers who can help you understand your .

I haven't named my provider, as i don’t see it as an issue specific to them but rather an industry question to underwriters and mortgage lenders alike. Ultimately other than this I'm perfectly happy with my mortgage lender.

An Open Letter...

Dear Mortgage provider,

I am writing an open letter as a loyal customer of yours for the best part of a decade. I have never missed a payment but due to some specific lending policies and procedures I have ended up out of pocket by thousands of pounds, at a time when I most needed it, which I am certain was never your intention.

You see whilst consistently prioritising my mortgage payments I struggled with debt, and entered into an IVA which I then successfully completed. As a direct result of entering an IVA, I fell into a segment of your customers which, understandably presents a higher risk.

When I signed up to a mortgage deal I had a discount period, this period ended during my IVA and so I wanted to sign up to a new discount period, but was told that I could not due to being in an IVA. This effectively meant that I was paying £300 a month more for my mortgage. Clearly, I present a higher risk but in reality despite significant budgetary constraints I had never missed a payment. Had I not entered into an IVA, payments to you would have been even more at risk. Furthermore, by not offering me the same good value deals the perverse consequence was to make it more likely, not less that I would default on a repayment, or fail my IVA.

I have calculated that over this period I could have saved approximately £10,000, which is not only a huge number, but in my case would have meant I could have paid back a much higher proportion of my outstanding debt. The only reason I was not able to claim this saving was that I was responsibly dealing with my debt. Someone with exactly the same debt profile but not in an IVA would have been able to extend the discount period.

Having successfully completed an IVA, I was then immediately able to access a saving, and as I had recently exited an IVA it was the best deal on offer for me. I clearly understood the deal came with early repayment changes but felt I had little options as it had a significant impact on my budget.

So roll on a further few years, I now have a proven Credit record and still have never missed a mortgage payment, I have learnt a lot about debt and never want to go back to the place that led to my IVA. Luckily my income has also nearly doubled. So I am in a good place financially here, and the IVA is ancient history as far as my credit file is concerned.

So with a growing family I now need some extra space and as the IVA meant no available funds for significant maintenance there are also a few things (like a new roof) that I would like to undertake. So I talked to you about extending my mortgage, initially you were positive and it was clear that someone in my financial position would be able to obtain extra funding in terms of affordability. But here too the ghost of my IVA raised its ugly head, and you turned me down due to having been in in an IVA. Since then I have received 2 mortgage offers from other providers. But the historic IVA on its own was enough for you to refuse the extension. Again I understand that you and your underwriters base a risk profile but I would argue that someone who has been through a debt crisis came out the other end is far more likely to understand their debt obligations, and someone who through that time has prioritised there mortgage and then rebuilt a good credit file would be a better risk than most of your existing portfolio.

So I am now left with paying the early repayment charges to allow me to escape from the shadow of my IVA. Early repayment charges that I only have because I had no other option than to sign up when I did, which was itself a consequence of internal policies relating to IVA’s. I don’t feel too hard done by here as over the period of the new discount I still would have saved money. But paying £2,000 just because your internal assessment of complex cases is not that sophisticated does irk a little.

My aim with this letter is to highlight the impact of some of your internal policies in the hope that it will prompt a review of the the way you deal with customers who are proactively dealing with their debt, those that can prove their risk profile is too wide to accurately predict the return on investment, and that your underwriters and you open up policies a little to look at the details behind risk based decisions.

Yours sincerely

Douglas Silverstone

Checking your credit file

If you are concerned about the effects on your credit file, in 2010, an agreement between the Department for Business, Innovation and Skills and the credit reference industry means consumers now have easier access to their credit reports.

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You can sign up for free access to your credit file. There are 3 credit reference agencies listed above, each with free online access. Some advice agencies can also request free credit reports on your behalf. You can also sign up to the Money Saving Expert Credit Club which provides a free Experian report and a suite of free tools to boost your credit rating.

Choosing a debt option

Money Advice Hub provides confidential, impartial and free debt advice on debt options, including IVA's. This personal blog and experience highlights how important it is to consider carefully the pros and cons of each eligible debt option. If you have any doubts, always seek clarification from a qualified and regulated debt adviser, and in this particular circumstance your mortgage lender.