I've been searching for an answer to this but can't find one so I hope someone can help me out.
I have the clause of equity release in month 54 at 85% LTV.
'After month 54 of the arrangment the Supervisor will obtain a professional valuation of the property. The debtor will then obtain two remortgage quotes from reputable brokers/lenders to satisfy the Supervisor that the equity realisation is the maximum achievable. The property shall be re-mortgaged to a maximum 85% loan to value less existing secured borrowings. A remortgage of less than 85% loan to value is allowable where the lower realisation will introduce funds equating to 100% of the debtors equitable share or where the arrangement will receive payment in full. Where the debtor is unable to obtain a remortgage the IVA should instead be extended by up to 12 months. The amount by which the additional secured borrowings increase shall not exceed 50% of the monthly arrangement contribution at the time the mortgage offer is obtained. Where it is demonstrated that after month 54 the equitable share is less that £5000 (gross) the property is to be excluded from the arrangement without extending the term. The cost of a re-mortgage to release equity shall be deducted from the mortgage proceeds and the monthly payments deducted from the contribution. If the increased cost of the remortgage means the dividend to creditors fall below £50 per month after fees, monthly payments are stopped and the IVA is concluded'.
Is gross equity after the 85% has been applied to the workings out or total equity in the property?
I understand it will only be my 50% of the equity and not my wife's.
Hi workingonit. Welcome to the forum. If you calculate 85% of the current value of your house; subtract any mortgage from it = equity; divide by 2 (you and wife) = your gross equity. If it's less than £5K, then your house is excluded from the arrangement, and your IVA would finish at 60 months barring any other extensions/payment breaks etc. Hope this makes sense! I'm sure others will be along to welcome and help you. x
IVA journey started: 30th March 2009. Settled: 17th July 2012. Completion Certificate received: 13th March 2013. Breathe. x
Yes, that is correct, 85% of your current house value, less outstanding mortgage is the amount you can release[in theory !]. If the property is jointly owned then it will be 50% of this remaining figure
This is completely incorrect according to DFD. I have just received the following today. Please read the whole email including my modifications which are the same as above. Note they talk about 100% LTV and not 85%!!!!
Dear Richard
I refer to your email below and note your comments, please find listed below my response.
I can confirm modifications supersede the terms of your original proposal.
You would require your ex-partners permission to release equity from the jointly owned property 50% of the equity would be used as your entitlement.
If your property has less than £5,000 equity based on 100% LTV then it would be excluded from your Arrangement, this would be the overall equity position not your percentage.
Should you be unable to remortgage and have more than £5,000 equity a 12 month extension of your Arrangement will be required.
If you require any further information please do not hesitate to contact me.
Regards
Hi,
My name is xxx and I am in year 5 of an IVA agreement administered by DFD.
I have just received a request to commence the year 5 remortgage / equity release process by submitting an up to date balance on my mortgage. This is fine and I will pop the documnet in the post shortly. However, can you first inform me of where I stand re my agreement and subsequent modifications to my agreement please?
The modifications (which I assume superceed the original agreement pertaining to equity release) are as follows:
'After month 54 of the arrangment the Supervisor will obtain a professional valuation of the property. The debtor will then obtain two remortgage quotes from reputable brokers/lenders to satisfy the Supervisor that the equity realisation is the maximum achievable. The property shall be re-mortgaged to a maximum 85% loan to value less existing secured borrowings. A remortgage of less than 85% loan to value is allowable where the lower realisation will introduce funds equating to 100% of the debtors equitable share or where the arrangement will receive payment in full. Where the debtor is unable to obtain a remortgage the IVA should instead be extended by up to 12 months. The amount by which the additional secured borrowings increase shall not exceed 50% of the monthly arrangement contribution at the time the mortgage offer is obtained. Where it is demonstrated that after month 54 the equitable share is less that £5000 (gross) the property is to be excluded from the arrangement without extending the term. The cost of a re-mortgage to release equity shall be deducted from the mortgage proceeds and the monthly payments deducted from the contribution. If the increased cost of the remortgage means the dividend to creditors fall below £50 per month after fees, monthly payments are stopped and the IVA is concluded'.
So now my questions based on the above:
1. My ex partner owns 50% of the property (as stated in the original agreement); how does this affect the remortgage equation?
2. If any available equity is less than £5000 (my share of any available equity subject to the 85% LTV rule) then my understanding is that a remortgage will not be required and the term will not be extended. In other words, if a valuation proves that my share of any equity, up to 85% LTV is less than £5000, then the term will not be extended. Can you confirm this please?
3. Under what circumstances will the 6th year be invoked? Is it when it is proven that my share of any available equity (above the 85% LTV) is over £5000 and I cannot get a remortgage to release this amount? Again can you confirm please?
Many thanks for your help with this important query.
Regards
Last edited by mouldymuffin99 on Wed Oct 10, 2012 8:15 pm, edited 1 time in total.
I am inclined go agree with the response you have received from DFD.
Turning to your further queries:-
1 Your ex-partner's share of the equity is not taken into account for the purpose of raising additional funds
2 I don't think this is correct. The £5,000 figures relates to the whole equity, and not that which is available having applied the 85% loan to value ruling
3 Again, I don't think the £5,000 rule applies here - if your equity share exceeds the 85% loan to value formula then either a remortgage or an extension of time is required.
So in my case I have a mortgage for £183000 and the house is valued at £209000, will my iva be extended 12 months even though the ltv is more than 85%?
Sorry Workingonit (and Melanie) this is NOT what DFD are telling me! Workingonit - which IP you with?
I received this email today:
Dear Richard
I refer to your email below.
The modification is split into 2 different clauses.
1) The property must be remortgaged to 85% LTV, currently lender’s will not consider this and the maximum we are able to achieve is 75% LTV so you will be unable to comply with this modification, should you be able to raise equity this would be offered in full and final settlement of your Arrangement.
2) The section referring to the equitable interest being less than £5,000 does not mention the 85% LTV and includes the wording (gross), therefore this relates to the whole of the equity.
This modification is a common term and this is how creditors have requested we apply it.
Should you have any further queries please do not hesitate to contact me.
Regards
What this means is that if there is ANYTHING above £5000 equity available against the whole 100% LTV and you cannot remortgage to release it, then the term will be extended by 12 months. So Workingonit that applies to you. Sorry.
Last edited by mouldymuffin99 on Wed Oct 10, 2012 8:13 pm, edited 1 time in total.
If your response in point 2 in your Oct 8th post is correct then it contradicts your post on Oct 9th. Can you confirm which you think it is?
The IP (DFD) is saying that the clause is split into two and that the 85% LTV does NOT apply to the £5000 available equity formula. Therefore Workingonit easily has >£5000 available equity and therefore if they cannot release the equity, the term will be extended.
