Equity Release Mortgage Term?

[DragonKeeper360]

Hi Folks,

Ive been directed her from the IVA board over on MSE by Foggy.

We are in the early stages of setting up our IVA, we've only just sent off our required paperwork. I'm trying to do as much research and reading up as I can though so that nothing ever comes as a surprise.

I understand that we may be asked to release equity from our home in the 4th year of the IVA, and that the increase in mortgage payments cannot be more than 50% of the IVA value (i.e. if IVA payment is £300 PCM, then the mortgage could concievably increase by £150 pcm)

Is there a guideline to how long the new mortgage is to be taken over though? My current mortgage has 14 years left to run, so by the fouth year i'll have 10 years left, how long should I be prepared to extend the term to?

Finally, do I have to relinquish 100% of the available equity, or am I allowed to keep any?

Thanks in advance people

DK

[lem]

Hi and welcome, I am not sure on the answer to extending the term of the mortgage, but regarding the available equity, you only have to try to remortgage up to 85% of the value of your home, however, much of this is academic as it is highly unlikely you would be able to remortgage these days once you are in an IVA, it is more likely that if you have equity in your home, they will instead put a clause into your proposal for a further 12 months payments into the IVA (making it 6 years instead of 5) in lieu of equity

[plasticdaft]

How much equity do you have in your home? I am guessing a decent chunk with 14 years left to pay.

Paul

[DragonKeeper360]

We currently have about 40000 outstanding on a 70000 valuation (estimated), so 30000 equity. I'm figuring that we'll reduce the outstanding by another 10000 over the next 4 years, and dont see house values improving in our area (depressed ex-mining town) so a worst case equity stake of £40000 at the fourth year.

Am i right in thinking we have to release 85% of this, so £34000?

Thanks again

DK

[plasticdaft]

What do your unsecured debts amount to Dragonkeeper360?

Have you been given any other options(other than the IVA)?

Paul

[DragonKeeper360]

We currently have in excess of £50k in unsecured debts, between myself and my wife.

We tried for a secured home-owner loan with freedom finance but were declined.

We spoke to CAB who agreed an IVA was the best soloution, and were put in touch with Grant Thornton, who are handling our application.

DK

[Sensible77]

From your posts it sounds as if you are both going into an IVA but please note that if it’s a sole IVA only 50% of the available equity is required.

[DragonKeeper360]

Its a joint IVA

DK

[plasticdaft]

DK,it sounds like you are getting good advice. No one will know what the mortgage market is going to offer in 4 years time,I think you did well to avoid the homeowner loan!!

Make sure you get in writing that you will not be required to sell your home to free any equity if you are unable to get a remortgage,and that if a remortgage in not possible all you will have to do is carry on with an extra 12 months contributions in lieu of any equity.

You are asking all the right questions,keep them coming!!

Paul

[Foggy]

All good advice above. Just like to say Welcome, DK

[DragonKeeper360]

Thanks for all youe advice/ encouragement folks.

& Hi Foggy

DK

[lloyd]

dont worry about equity clause .i got valuation on property and a copy of mortgage .couldnt get a mortgage .submitted these to my iva case officer .extended iva by 12 months no problem . best way after u take int consideration mortgage fees /term of mortgage /interest payments etc etc .hope this helps

[deesey]

Now Im really confused having read this.I know its last year BUT noone said anything about selling our home.We have a large remortage on it already so a remortage is out of the question.Starting to panic we didnt owe any arrears on our cards.I phoned as we wanted some advise on only making min payments til the overtime started again.Oh well nearly there now lets see if an extra year is added that makes it 2015.2yrs 3mths>there again thinking about it weve got through half the sentence

[back on track]

you don't have to sell your home.
the equity clause means that at month 54 as is standard you have to get a valuation or 2 on your home and redemption figure from your mortgage provider.they then see how much of your secure borrowing(including any remortgaging you have had)is left owing against what your house is worth at said 54th month of your iva.then its normal do 85%ltv calculatuion to see if you have any equity left.normally its anything above £5000 if you have this in your proposal.so if you have £5000 or less equity it means you finnish on month 60.
if you do have more than this then you are expected to try and remortgage for the available equity but its nigh on impossible so they normally extend iva by 12 months to cover the equity.it should tell you in your proposal all this.give your iva company a ring if you cant find anything referring to this.
don't worry its normal and you wont have to sell your house.