4th year equity release

[northumbrian69]

Hello again

Just made my second IVA payment, getting used to living on a tight budget, its going to be tough but at least the nasty phone calls and threatening letters have completely dried up.

I have a question for the experts, I have a 4th year equity release clause in my IVA, by the time I get to year 4 I will be almost 62 years old, I intend to continue working as long as possible, however I could be forced to retire at 65 which would reduce my income to 40/60ths of my current salary.
Will this be taken into account when I apply for a remortgage, I am really concerned that I will be pressurised into a position where I have to increase my mortgage payments to a point which I will be unable to sustain after I retire, then I will be back to square one.

Can any forum members advise me of the likely outcome, if the housing market continues to rise at current rates I could have considerable equity available, not good news when old age is approaching. [xx(][xx(]

[Adam Davies]

Hi
Any equity release will be down to your ability to pay which in turn will affect your ability to get a remortgage.You may be able to offer a one year extension to your IVA instead of the equity release.
If house prices continue to rise you may be able to offer a full and final before your five years are up.


Andy Davie
IVA.co.uk Spokesperson and site manager
(aka Neverending)

Please check out my blog: http://andydavie.blogs.iva.co.uk

View my profile here:
http://www.iva.co.uk/andy_davie_profile.asp

[MelanieGiles]

Hi Northumberland

These are issues which really need to be thought through at the time you are asked to enter into such agreements. In reality, the creditors will expect you to raise whatever percentage of the equity they have demanded or your proposal offers. They will not be concerned as to how you do this, but you have to be very mindful of affordability especially as you run up to retirement and thereafter.

As you have commited to this uncertainty, I suggest that you keep a close eye on the property market which is anticipated to continue rising over the next five years. There is every possibility for you to put forward a variation of terms at that time, in the event that you are unable to re-mortgage the amount required. And you can also sell your property as an alternative.

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

[northumbrian69]

Mel/Andy
Thanks for the answers, I'm still not clear where I stand??I'm obviously having a slow day [:(][:(]
Selling up is a last resort, the annoying thing is I could have gone bankrupt and family and friends were willing to buy the small equity so I could keep the house, I opted for an IVA as the more honourable thing to do, I hope it hasn't been a big mistake.
My IVA modification states I have to get a house valuation in year 4 and a minimum of two offers of remortgage, if I can't get remortgage offers my IP will call a creditors meeting, it then goes on to say if the remortgage is sufficient the IP may apply to terminate the IVA early.
What I don't know is what percentage repayment constitutes full and final settlement, my IVA was accepted at 32p/£, I would hate to think I have to pay £770/month for 5 years then be forced into a position where I have to sell my house as well.
Surely the maximum raised on a remortgage should be limited by my ability to make the repayments and not by rapidly rising house prices.
Please tell me I haven't made a huge mistake here [:(][:(]

[tracy.h]

Hi im sorry you are stresing i think they should assess the equity in a property at the beginning of an iva at least that way you know where you stand, regardless of how much equity you accumalte over 4 yrs.It seems very unfair that you may have to sell your home after struggeling and being honourable in paying your creditors as much as you possibly can.
Thats why when people get there iva's excepted they should really look at what the equity release meens and what affect it will have long term.
Its ok if you are in a position to remortgage,but obviously in your case you will have to work til you are 70 that seems so unfair.
I really do hope you can find a way with out having to sell your home
Good luck
Tracy

[MelanieGiles]

Hi northumbrian

The answer is in the modification - you get the house valued in the fourth year and seek two independent offers of re-mortgage. You are obliged to take out the one which gives creditors the most money, and can then finalise the IVA as the additional mortgage payments will probably absorb your disposable income. The modification goes on to say that if you cannot re-mortgage, then the IP is to call a meeting of creditors to ascertain an appropriate way forward.

The percentage which constitutes full and final settlement, is the amount you are able to borrow from your new mortgage - and this cannot be ascertained until the property is valued and suitable mortgage offers sought. The bottom line is that you could be required to borrow enought to pay all of your debts off in full - perhaps including statutory interest as well which runs at 8% per annum.

If you were my client, and I was faced with the situation in 4 years time that you were unable to afford to borrow the equity money, then I would recommend to your creditors that they accept what they have received to date in full and final settlement. I have done this on several occasions with success.

I have to say that I am rather suprised that you are only now realising the implication of the modification you agreed on the day of the creditors meeting. This has serious implications if you have not understood the requirements, or they have not been properly explained to you. Were you perhaps carried along by the heady exilaration of IVA acceptance, without realising you were committing your home (or at least the bit that you own) to your creditors as well as making contributions? Did your IP clearly explain this to you on the day of the creditors meeting?

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

[northumbrian69]

Thanks Mel

When I had my original interview with my IP (this took 2 hours) all my options were fully explained, I was told that a 4th year equity release clause could be included in an IVA but in my case it would only be a 'paper exercise' because my age would limit the maximum sum that could be raised by remortgage.
On the day of the creditors meeting I was so relieved that I had been accepted after the months of stress and worry that the equity release modification seemed trivial, in fact the lady who rang me to tell me the IVA was accepted gave the impression that the equity release clause was a minor modification.

Have I been given the correct information regarding remortgage, do creditors have to accept the maximum that can be raised based on my ability to pay, or can they force me to sell my house to release all available equity.
If the latter is the case I may as well fail my IVA now and go bankrupt, that way my family can buy the current small equity in my house and my creditors will get considerably less than would had I sustained the IVA.
It's a daunting thought having to live like a pauper for 4 years with the possibility of being made homeless at the end of it, it makes you wonder if doing the honourable thing is worth it.
I have spoken to my H.R. department this morning, I have been told I can work past 65 if I wish, I would draw full salary plus my company pension, so assuming I remain healthy I can continue earning, safeguard my home and do my best to pay off the mortgage, then perhaps I can retire, hopefully debt free.

I hope other Forum members take note of my demise and make damn sure your IVA terms are fully understood!! [:(][:(]

[Adam Davies]

Hi
I,ve said it before and i,ll say it again. We need to change the fourth year equity clause so that the amount to be raised is agreed at the start of an IVA so that everyone knows where they stand.To go through four tough years not knowing how much you will have to remortgage for and pay for many years is just unfair.
regards

Andy Davie
IVA.co.uk Spokesperson and site manager
(aka Neverending)

Please check out my blog: http://andydavie.blogs.iva.co.uk

View my profile here:
http://www.iva.co.uk/andy_davie_profile.asp