valuation question?

[Foggy]

Hi Marcus. As things stand, at the moment, there is no crisis to worry about. These new figures agree with those in your very first post on this thread, so should be no surprise ( even if you factor in that you should only be required to raise 85% of the equity). It is a fact that your equity, in any event, exceeds the deminimis trigger of £5k.

So, the next step, as outlined in your proposal, is that you should attempt to remortgage. This will be turned down in all likelihood. Then the alternative should be a 12 month extension.

Re-read your equity release clause carefully. They generally ask for a remortgage ---- some firms are now pushing secured loans on their clients. But a secured loan is not a remortgage.

[marcus777]

Hi Foggy thanks for the reply , struggling to get my head round this. I thought based on the following house value £160.000, 85%ltv on £160.000 =£136.000 ,£136.000 less mortgage and secured loan £128.820 =£7180 ,split between my wife (not included in iva) and myself leaves £3590 . I thought this is how it would be worked out following the advice i received on here .Should i have to re mortgage (or attempt to)based on these figures? .From what i have received today they have not applied the formula stated above but simply deducted the valuation and outstanding mortgage etc to leave £31.184.09 and simply halved it down the middle .Is this right? thanks Marcus777

[Foggy]

Assuming you are under the 2008 Protocol:

Home equity
9.1 Six months prior to the expiry of the IVA there should be an attempt to release home equity (this would normally be after month 54, unless the IVA has been extended for any reason). However, where the debtor is unable to obtain a re-mortgage, the IVA should instead be extended by up to 12 months.

9.2 The amount of the equity to be released will be based upon affordability from income and will leave the debtor with at least 15% of their equity in the property. Where it is appropriate to re-mortgage the property through a repayment mortgage (as opposed to interest only), the specific limits will be:

• Re-mortgages would be to a maximum of 85% LTV.
• The incremental cost of the re-mortgage will not exceed 50% of the monthly contribution.
• There will be a cap on the total equity release to not exceed 100% of the remaining outstanding debt.

This does not prevent the IVA Provider proposing a more suitable arrangement where the circumstances warrant it.


9.3 If the amount of equity available in the home at month 54 is under £5k, it is de minimis, and does not have to be released, and there would be no adjustment to the IVA term.

I guess there is a little leeway in how your IP interprets 9.2, point 1.

I would say that the value of the property for the purposes of equity release is limited to 85% of the open market value, as you have done.

But your IP seems to be looking at 100%.

What does your proposal say ?

[marcus777]

Thanks Foggy, IVA taken out January 2009 with payplan so not sure its protocol compliant.

My proposal states that
In month 54 of my arrangement a valuation will be carried out on the property if that valuation shows that 85% of my interest in the value of the property (after deducting the amount of loans referred to above if £5000 or more I will seek to re-mortgage my share of the property subject to the following conditions
The re-mortgage will be at a maximum of 85% of the value of the property
The cost of the re-mortgage will be deducted from the mortgage proceeds
The increased amount that I have to pay because of the re-mortgage will be deducted from the monthly contribution in the arrangement
The increased amount I have to pay because of the re-mortgage will not exceed 50% of the monthly contribution in the arrangement
The amount of total equity release does not exceed 100% of the remaining outstanding debt.
If the increased amount that I have to pay because of the re-mortgage means that dividends to creditors falls below £50 per month after fees monthly contributions are stopped and the IVA is concluded.

Thanks, Marcus777

[Foggy]

Yes, Marcus, that accords with the 2008 Protocols.

So, as per that wording in your proposal,"The re-mortgage will be at a maximum of 85% of the value of the property"

So -- open market value at £160k, therefore max you can re-mortgage is £136k

Less oustanding liabilties secured on the property, of £128,820, does leave equity available to you both of £7180 -- your share, by both of our calculations is deminimis.

Hopefully an Expert will happen along and point out where both of us seem to be going wrong (or confirm that your IP is at variance to the way they would calculate it).

[marcus777]

Thanks for your help Foggy much appreciated ,could any experts out there offer an opinion ? Thanks Marcus777

[Foggy]

Could an expert please comment on the method of arriving at the equity release figure.

In this case both the OP and I are basing this on 85% of the FMV, which gives us a deminimis figure. The IP is using 100% FMV.

[Tina Shortland]

Hi Marcus777 - it would appear as Foogy states, your calculations are being based on 100% LTV when in fact it should be 85% as you have calculated above. You need to go back to your IP to ask how they are arriving at their figure and whewre in your proposal supports that calculation.

I believe from what you have said the figure of £3590 is correct unless there is something I have missed and will stand corrected!

[Foggy]

FOOGY ?

[marcus777]

It would appear after contacting payplan that it is a bit of human error and they verbally now agree with the my figures , just waiting to have it confirmed in writing ,Thanks to everybody who replied, Marcus777