Equity Release Clarification Please??

[northumbrian69]

The dreaded 4th Year Equity Release time is looming, I have been told I must try and remortgage around March 2011 which is actually the beginning of my 5th year.
After all this time I still don't fully understand how "available equity" is calculated???

Is it- Market value - Outstanding mortgage
0r is it- (Market value x 85%) - Outstanding mortgage

Which calculation is applied, common sense would be the second option but I read so much conflicting information on this subject I still don't know the correct answer.

Any ideas please. [:D][:D][:D]

[Adam Davies]

Hi
Mu understanding is that it is 85% loan to value less your outstanding mortgage.
The reality is that you will probably only be able to attain 60-65% loan to value in todays market
Regards

[Michael Peoples]

You would need to check the proposal as older ones asked for all equity. Get the valuation and redemption figure and send the details to your IP. If there is any equity you will probably have to extend the IVA because as Andy says there are few if any mortgage products available to those in IVAs.

[northumbrian69]

My proposal states:
"Must obtain a minimum of 2 offers of remortgage which address the debtors share of any equity. Should the debtors be unable to realise any equity a meeting of creditors must be convened"

I contacted my IP and requested clarification of what would happen in the event I could not get a remortgage, the answer was:
"If no equity is available or application for a remortgage is unsuccessful a creditors meeting will be called and a request made to exclude this asset from the arrangement"

No mention of extra payments??

Is this normal??

[Michael Peoples]

It seems perfectly reasonable and normal. If there is no equity the arrangement ceases but if there is equity and it cannot be raised the IVA is extended. Creditors cannot expect the IVA to be extended to address non existant equity.

[northumbrian69]

Like most other areas the bottom has dropped out of the housing market in the North East, currently 85%LTV would realise <£5000 which should mean no equity available and no extra payments.
If however it was based on 100%LTV as Michael is suggesting, there is equity available but no chance of obtaining a mortgage to release these funds, is it fair to extend the term under these circumstances???

This is the part of equity release rules that I cannot understand, it's so frustrating [:(!][:(!]

[Michael Peoples]

If you were able to remortgage, the whole mortgage balance would be switched to adverse rates in order to raise a relatively small amount. An extension means you can keep your existing lender and while the IVA would have to run an extra year the benefits would be better in the long term.

[northumbrian69]

So it's a choice between a 100% mortgage at adverse rates (loan shark) and dramatically increased mortgage payments (back to square 1) or an extra 12 payments.

During the current financial climate (no chance of getting a mortgage) I don't know why they don't just abolish equity release and make all house owner IVA's 6 years and be done with it.

It seems if you want to hang on to your house you may as well accept the fact that you are going to have 72 months of pain instead of 60 months.

I thought I had less that 2 years to do, obviously not!!

[Tillergirl]

hi Brian,

I m just about to embark on an IVA and as you quite rightly say the chances are it will run for 72mths not 60. Whenever I talk to my family about things and they say - it'll all be over in 5 years, I correct them and say 6!!!

Luckily alot of the advice I got from various IVA firms advised me of the likelihood that the IVA would run for an additional 12 mths. But like you say it would be nice to know for definite as opposed to worrying - will I be made to release equity or will I make an additional 12 mths payments.

Are you the sole owner of your property? Or is it joint? And what is the mortgage remaining and what is the current valuation? If you give me the figures I can show you how the equity release may or may not work.

[leaKybrain]

This subject has been coming up on a regular basis on here, about the fact that home owners will have to be the 72 months as there is no one that will re-mortgage.

I too have been assuming 72 months.

[MelanieGiles]

There is no way you will get a remortgage Northumbrian, so this matter is rather academic. Expect creditors to want you to pay an extra years worth of contributions, which seems to be the norm these days.

[kallis3]

I've accepted the fact that I'm going to have to do the extra 12 months. Not ideal but I actually think it's better than remortgaging.

[northumbrian69]

My original IVA proposal offered an extra 3 good will payments in lieu of equity even though at the time there was zero equity available.
I was then asked to agree to a 4th year equity release clause, I asked at the time what would happen if I couldn't get a mortgage and the answer was a request would be made to remove the asset from the agreement, no mention of an extra 12 payments.
What really annoys me about this whole situation is, I could have gone bankrupt and still kept my house because at the time there was zero equity and my daughter could have bought my interest for £1, I would also have been discharged long ago.
However I did what I thought was the honourable thing to pay back as much as I could only to find the rules kept changing to the advantage of the creditors.
Because of the current financial situation equity release is no longer viable so just add on another 12 payments as compensation, really unfair (that's my personal opinion)

There is no way you will get a remortgage Northumbrian, so this matter is rather academic. Expect creditors to want you to pay an extra years worth of contributions, which seems to be the norm these days.

[Broke of London]

The downturn couldn't have been factored in when your proposal was drafted so it is unfortunate this has come as a surprise but i wouldn't say it is unfair for the creditors to want back as much of your debt as possible.

[geoffr]

Northumbiran, I agree with you.
I posted something recently about the same thing. A 5 yr plan and your debt free...not the case at all as my company (Grant Thornton) also request a further yr if ive no equity (which there will never be, as i wont remortgage with my ex wife). They told me at the time dont worry if I cannot remortgage, they will exclude it from the plan towards the end...hmmm
I pay 79p in the £ which im told is a good level for an IVA. Ive just finished my first yr, and am awaitng my review results. I find it hard to accept that after my IVA company take their 10k in fees, and with a dividend is 27k, this can then be adjusted for a further yrs worth of payments,..that contridicts my plan - my 79p in the £ agreement???? SO...whats happening is they are getting 100% back by asking for the plan to be increased 1 yr. I thought that your debts where written off to a degree and payments set for 5yrs.Whoel thing has hacked me off...Life on hold for 5 years, now add another...two divorces, lost everything and now this..sorry sick of it