I'd be really grateful for some help here. I'm supposed to be a smart person and I'm in a smart job but the equity release issue has me completely baffled.
I'm approaching the end of Year 4 and I own property so I know that over the next few months I will need to get valuations etc to deal with this. My concern is that I live in North London and so the value of my property has gone up massively so I'd like to prepare myself mentally as far as poss but I'm struggling with understanding the basic concepts of this, despite having read loads of the posts.
This is what I understand: My flat is probably worth about £300k. My mortgage/sec loan will be about £130k. That makes the equity £170k. (From here, I'm lost.) Am I likely to be expected to try and remortgage up for up to 85% of £300k? Which would mean increasing my mortgage from £130k to £255k? Have I understood that correctly?
From my original IP:
Six months prior to the end of the arrangement you will arrange for an open market valuation to be carried out on the property by an independent professional valuer. If that valuation shows that 85% of your interest in the property (after deducting your share of the mortgage and/or secured loans is less than £5,000 (net of all costs to take out a new mortgage) then you need contribute no more to the arrangement in respect of the property.
If that valuation shows that 85% of your interest in the value of the property (after deducting your share of the mortgage and/or secured loans referred to above) is £5,000 or more (net of all costs to take out a new mortgage loan) then you will seek to remortgage your interest in the property and introduce this money into the arrangement.
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Hugely grateful for any help anyone can give me on this.
Basically if your equity is over £5k, which it is, you need to attempt to remortgage to introduce 85% of the equity, or the amount required to pay the full original debt, plus fees and possible statutory interest.
Currently it is impossible to remortgage ( some firms will attempt to get you to take out a secured loan, which, if your agreement, says "remortgage" they cannot force upon you.
There should be a fall back clause which says something along the lines of "if unable to release equity the term of the IVA will be extended by 12 months" ...... check to see if your agreement ( they do differ) has this. If so that is the most likely outcome - 12 extra months at the normal repayment level.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
Thanks, Foggy. My agreement does have a fallback. It says:
•"A third party sum equivalent to 85% of your interest in the property, or
• 12 additional monthly contributions (with the aggregate sum paid to the Supervisor being limited to 85% of your interest in the property)."
In your experience, do you think "A third party sum" could be translated as a secure loan?
Also, how does it work in practice? I'll ring Creditfix and ask them how their process works but could I expect them to provide a statement saying what the outstanding debt will be after 5 years? I've never seen anyone commenting on this part of the process anywhere on the forum.
It's all my debt and I don't have any issues with paying back what I can but I get my peace of mind from having as much info in advance as I can so that I don't get any unwelcome surprises at the time. I'll be more than happy with having to make an extra 12 months payments in lieu of taking on more debt.
PJG DID NOT consider a secured loan
it was remortgage or a loan from a family member there are lots od previous threads on this do not let Creditfix tell you otherwise
In your case I would expect a 12 month extension. In practice you will provide a house valuation and a mortgage settlement figure to arrive at the equity and CF will then just say that an extension applies. A secured loan cannot be forced on you ( as it can in newer arrangements).
Outstanding debt figures are meaningless, unless you can settle, which is very unlikely.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
On behalf of all the silent, anxious users of this forum, I'd like to thank all the active users for their efforts. I've found it all a real comfort over the past 4 years.
While a twelve month extension may be the best option for you it might be worth having a word with Shaun Vickery anyway to discuss how a secured loan would work. It seems you already have one of those so it may be possible to get this replaced at a cheaper rate of interest while raising sufficient funds to close the IVA down.
Any additonal borrowing can only be at a maximum of 50% of your IVA payment so if you get overtime, bonuses etc which have to be paid to the IVA then perhaps it would be worth getting out now. You can refinance the lot in a year or two when your credit file is totally cleared up.
No harm in asking Shaun as it may be a suitable option and if you cannot raise the funds then this will help you get the twelve month extension.
It might be worth a chat with Shaun and depending on the rate of your current secured loan you may be able to get a cheaper deal and out of the IVA. If not, nothing lost and you can have the twelve month extension and then remortgage afterwards anyway when your file is clean.
So I can get the formula correct, is this what I need to do?
I'll add up all my payments to date and a PPI refund that was made.
I'll deduct the IP fee percentage from that.
> That will give me the amount I've paid into my IVA.
I'll then deduct that from the initial debt.
> That will give me the figure I'd need to get from a secure loan to close down the IVA.
Does that the figure then become the figure for a F&F offer?
Then I'll forecast how much my monthly payments will add up to, including an extension year, and compare this figure with the secure loan figure. (My back-of-a-fag packet sum has already told me this figure is a lot lower.)
If the secure loan figure is the lower, then I'll investigate this further. I need to bear in mind that the repayments can't be more than half of my current IVA payments nor last longer than my existing mortgage/secure loan term.
Your calculations would be correct if you were paying off the debts in full but that would not be the intention.
Basically you would divide your current monthly IVA payment by two and add that amount to the £355 you currently pay for the secured loan. For example, if you pay £300 per month IVA then your new secured loan payment could not exceed £505 per month regardless of the amount of equity in the property. This clears the existing loan and raises funds to offer as a full and final and if these funds are anyway near what creditors would get from voluntary payments over the remainder of the IVA then they usually accept.
This would reduce your outgoings by half of the IVA amount but may mean you pay more in the long term. I think in most cases people look to remortgage later anyway and clear the loan but that would be for you and your broker to sort out.
