Equity Release Clarification Please??

[deepinit]

In my chairmans report it goes on about 85% mortgage and over £3,000 equity, so if I work this out right my mortgage is £167,000 and I'm paying interest only, so in year 5 my house would have to be worth in excess of £195,000?

Which i don't think will ever happen,have i worked this out right?

[Imhotep]

The 85% is current market valuation. If your house is valued at 100k then only 85k can be taken into consideration in the IVA.

If you have an outstanding mortgage of 84k that leaves 6k you may have to free up. But only if:

1) you actually can re-mortgage
2) the extra cost of the mortgage repayments does not exceed 50% of what you pay into your IVA on a monthly basis

If you cannot remortgage you will be required to pay an additional 12 payments into your IVA. You have to prove this by supplying two rejection letters.

If you have less than 5k equity that you can try to release the IVA concludes at the 60th month (assuming it hasn't been extended for whatever reason).

That is what I understand now.

[Truly]

What is the current market value of your house? Is there any equity?

If you are paying interest only, then in five years you would not have paid any capital: so....depending on the market value of your house now for example:MV = £170,000 and the current Mortgage = £167,000 the sum would be as follows:
£170,000 - £167,000 = £3000 (Equity)
85% of Equity (£3000) = £2550

I think the 85% is the amount of equity the creditors want you to raise by remortgaging your house??

I'm not too sure on that, but one of the experts will be able to correct me if I'm wrong.

[deepinit]

thankyou for that truly i thought it was 85% of mortgage minus value of house, at the moment my house is worth about £130,000 so the market would have go up some way to give me any equity worth giving over, but thanks for clearing up the 85% thingy i was way out with house having to be worth £195,000 haha

[Truly]

I can't be certain that I've actually got it right. It's just the way I understand it.

I'm sure one of the forum experts will be able to correct me if I'm wrong.

Take this scenario for instance:

MV = £170,000
OSM = £167,000

85% LTV = 144,500

If this was the case, and the 85% is of the current MV then the maximum mortgage you would be able to obtain would be £144,500 - this would indicate to me that the equity on your property should be £25,500. (it clearly isn't as you already owe £22,500 more than your current outstanding mortgage. In order to release the available equity, you would need to borrow another 3000?? If you could find a company who would be prepared to lend you the money, it would tip your mortgage well over the 85% LTV as current LTV is £144,500.

Does this make sense?? I'm rubbish at maths LOL [;)]

[MelanieGiles]

I'll give an example:-

Property worth £200,000 in final year
Mortgage outstanding is £150,000 in final year
85% LTV is £170,000
Therefore equity to be raised is £20,000 - but probably can't be due to existence of IVA, so ......
12 additional payments in lieu of the £20,000 based on the level of current DI
If someone is paying £300 per month they would pay 12 x £300 = £3,600 and the IVA would conclude at the end of a sixth year.

BUT - different scenario

House is worth £200,000 in final year
Mortage outstanding is £185,000
85% LTV is still £170,000, but there is no money to raise as the current mortgage exceeds this sum

And - don't forget there is a £5,000 deminimus figure as well

BIG CAVEAT - this advice only relates to IVA protocol based IVAs. If yours is not a protocol IVA, then your terms may differ as there are a lot of differing versions of the equity release clause out there.

[Truly]

Thanks Mel, I knew you'd be able to clarify.
That makes it so much easyier to understand.

So to sum it up then, the following equation would apply?

85% market value, minus outstanding mortgage = Equity (min £5000 if protocol compliant)

[geoffr]

Morning guys,

Just so i know roughly where im at i have an outstanding mortgage of 193,000 interest only, with a 15k secured loan, so total borrowing £208,000...how would this work for me..assume the secured loan is taken into account..to be honest i dont want there to be any equity as my ex wife is in there and should be..long story

[Broke of London]

Hi, what's the value of your house?

[geoffr]

Hi,
Ive only just got my first year out of the way but judging by rightmove similar houses are selling for £220,000.
Kind Regards

[northumbrian69]

I have a pre protocol IVA, I take this to mean the 85%LTV rule doesn't apply to me.
I know I won't be able to get a remortgage, does that mean creditors can pretty much demand what they want as there doesn't seem to be any rules in place if you can't release equity in a pre protocol arrangement.
I guess they could even force me to sell my house, after 5 years of struggling to make ends meet this is really scary, I've been trying to get an expert opinion to this problem for months unfortunately no one seems to know the answer [xx(][xx(][xx(][xx(]
My IP tells me he will request that the asset is removed from the arrangement if there is no equity or I can't get a remortgage, how much power has he got to actually make this happen, judging by many posts I've read on this Forum the creditors seem to be able to demand pretty much anything that suits them.
It's times like this when I start to wonder if it's really worth all the pain [V][V][V]

I'll give an example:-

Property worth £200,000 in final year
Mortgage outstanding is £150,000 in final year
85% LTV is £170,000
Therefore equity to be raised is £20,000 - but probably can't be due to existence of IVA, so ......
12 additional payments in lieu of the £20,000 based on the level of current DI
If someone is paying £300 per month they would pay 12 x £300 = £3,600 and the IVA would conclude at the end of a sixth year.

BUT - different scenario

House is worth £200,000 in final year
Mortage outstanding is £185,000
85% LTV is still £170,000, but there is no money to raise as the current mortgage exceeds this sum

And - don't forget there is a £5,000 deminimus figure as well

BIG CAVEAT - this advice only relates to IVA protocol based IVAs. If yours is not a protocol IVA, then your terms may differ as there are a lot of differing versions of the equity release clause out there.

[Imhotep]

I have a pre protocol IVA, I take this to mean the 85%LTV rule doesn't apply to me.

You really need to read your agreement thoroughly. It could say anything, it could even mention the 85%. They are not called IVAs for nothing [;)]

IMO any IP worth their salt should try to ensure you do not end up homeless at the end of your IVA.

One of the appeals of IVAs is that you can protect assets such as your home.

[northumbrian69]

I have read my agreement thoroughly, many, many times, no mention of 85%LTV, no mention of an extra 12 payments, all it says is if I can't remortgage a variation will be called, I asked for clarification from my IP and was told that he would request the asset be removed from the arrangement in the event I couldn't remortgage.
Unfortunately after all the conflicting information I am reading on this Forum I'm not very confident that he can actually achieve this, it appears creditors call all the shots.
This seems to be a massive loophole, I am genuinly worried and totally hacked off that I can't get a straight answer.

I have a pre protocol IVA, I take this to mean the 85%LTV rule doesn't apply to me.

You really need to read your agreement thoroughly. It could say anything, it could even mention the 85%. They are not called IVAs for nothing [;)]

IMO any IP worth their salt should try to ensure you do not end up homeless at the end of your IVA.

One of the appeals of IVAs is that you can protect assets such as your home.

[Imhotep]

Ah sorry, my misunderstanding.

I just hope that the current trend (i.e. protocol compliant) in IVAs has some bearing on your variation meeting.

[blodwyn5]

I've been reading through this thread with great interest but apologies if I'm opening another can of worms.

If you have, for exmaple, 28K equity in your property and you are unable to re-mortgage BUT you have paid off during the 5 years near enough the full amount 100p in the pound, statutory interest and Supervisor fees plus little extras then surely the IVA will complete as satisfactory and the Creditors will not expect the arrangement to run into a 6th year in leiu of the equity.

Am I correct in saying this or would the creditors still want some of the equity ??