Why am I having to pay an equity release loan before remortgage?

[Goosed]

There have been a few `debates` on this issue on the forum over the last 18 months or so as more and more people are falling victim to this equity release tactic.

In previous threads it`s been mentioned that in the end it`s all down to the proposal wording, but I guess a lot of people`s proposals have pretty ambiguous wording leaving the outcome down to interpretation.

Most debtors will know exactly what they were told by their IP and relevant IVA provider company staff during their proposal drafting stage no matter how the proposal is worded...Were any debtors ever told at any stage that they could possibly face a secured loan?

If so then fine, if not then from previous thread postings it looks like it`s down to the individual facing the situation, having never had an inkling of the secured loan equity release route being a possibility to challenge the IVA provider trying to force them into a secured loan via the complaints procedures...if they feel suitably enraged/aggrieved.

A couple of posters have successfully fought off the threat of being forced into the secured loan scenario, one quite recently.

[Rose68]

Thanks everybody for your help although I am really still none the wiser as to what to do.

I called DFD last night to see if they could explain it all to me and what they said still worries me.

They said that because I have equity in my property I cannot be offered the 12 month extension and I asked why I can't remortgage now rather than in 12 months time and she kept saying that this is a remortgage but it isn't! Today I have had all the legal documents arrive though my door for the propsed 'secured loan' with a 17.90% interest rate for a term of 180 months.

DFD say that the reason this happens is so that in 12 months time I can remortgage because at the moment nobody would touch us with the IVA and that this would clear the IVA and give us a years credit score.

With all of the replies that I have had on here I'm afraid I am now in even more of a quandary than before as The Select Partnership now want signatures and documents asap.

[nickjohn]

If you are happy that when you first negotiated your IVA that if you could not secure an equity release via a re mortgage then you would make another 12 payments then I would tell them to stick it...

Your credit file will not start to improve till after the six year period ends ANDonly when you have submitted your completion paperwork to the credit agencies, as we know this can take an age as well..

Any remortgage after your IVA ends will also be a lot higher than what you are paying now.

As I say double check your IVA and if there is no reference to taking out a secured loan in place of an equity release via re mortgage then ask them to detail where in your IVA it says this is what you must do..

[nickjohn]

Don't get bullied into signing things...

[MelanieGiles]

But why would you want to re-mortgage again in 12 months time Rose68, at additional cost again - probably to try and consolidate your existing mortgage and secured loan into one account - and of course there are no guarantees that you would be able to do this.

I am going to take this matter up with the IPA for a definitive response, as Andy is quite correct the situation is confusing for clients of some firms. I am glad to say that the policy in my firm is not at all ambiguous.

[Goosed]

font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by Rose68

Thanks everybody for your help although I am really still none the wiser as to what to do.

I called DFD last night to see if they could explain it all to me and what they said still worries me.

They said that because I have equity in my property I cannot be offered the 12 month extension and I asked why I can't remortgage now rather than in 12 months time and she kept saying that this is a remortgage but it isn't! Today I have had all the legal documents arrive though my door for the propsed 'secured loan' with a 17.90% interest rate for a term of 180 months.

DFD say that the reason this happens is so that in 12 months time I can remortgage because at the moment nobody would touch us with the IVA and that this would clear the IVA and give us a years credit score.

With all of the replies that I have had on here I'm afraid I am now in even more of a quandary than before as The Select Partnership now want signatures and documents asap.

Hi Rose68,

I`ve bumped a historical subject related thread to the top `Secured Loan & Equity` for you to ponder over,

So you can see how someone else facing your situation went about things...the ensuing debate and responses accordingly.

You`ve been told you have to take out a 15 year secured loan at 18% APR to meet your equity release clause AFTER enduring a five year IVA[:0]

Rippemoff & Scarper should be the name of your IVA provider, surely.

[nickjohn]

font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by MelanieGiles

But why would you want to re-mortgage again in 12 months time Rose68, at additional cost again - probably to try and consolidate your existing mortgage and secured loan into one account - and of course there are no guarantees that you would be able to do this.

I am going to take this matter up with the IPA for a definitive response, as Andy is quite correct the situation is confusing for clients of some firms. I am glad to say that the policy in my firm is not at all ambiguous.

Out of interest what route to you take with your clients Mel, 12 month extension if no equity release available or secured loan?

[MelanieGiles]

12 month extension every time, unless the secured loan option presented a better solution and was being suggested by my clients as a method of bringing the IVA to an end. I have never had this suggested by any of my clients.

[UpToMyNeckInIt]

...I suppose a lot depends on the equity release wording.

I understand that some older IVAs (pre-2010 protocol), have much more stringent equity release clauses, where the bottom line is almost: 'remortgage to release equity, or sell-up'. (There is another recent post on the forum, where the customer seems to have quoted similarly harsh terms).

We all know that IVA customers pretty much cannot get a remortgage no matter how much equity they have. So faced with the prospect of losing your home, a secured loan is far more preferable.

[Foggy]

This is true, UpToMyNeck, but many variations of these draconian clauses have been proposed to creditors recently and, generally accepted, to bring the clause to modern terms. A sympathetic IP should be exploring this avenue, rather than hammering the client with an outdated agreement.

[Goosed]

UpTomyNeckInit, Foggy...

It`s not just the ambiguous wording debate that concerns me, I`m more concerned that some IP`s / IVA providers are simply not advising people...not making any mention at all at any stage of the initial phone interviews and throughout the whole proposal drafting stage, that the secured loan route may ever be an equity release vehicle.

Debtors who are to incur the equity release clause are being advised, told and led to believe that If they cannot remortgage they will extend for twelve months, simple as that...It seems the first they hear of this secured loan scenario is when it comes to equity release time, or like myself via the issue appearing on the forum through prospective victims posts.

It seems to me that some IP`s / IVA providers are at best deliberately withholding the information as they know that most debtors would not agree to sign up to pay a five year IVA then take out a 15 year secured loan with an 18% APR after enduring the five years of the IVA...Would You ????

Or they are simply trying it on as they will obviously receive some sort of commission from the loan providers, this after the fees they received for setting up and administering the IVA itself...fees they wouldn`t have got if the debtor hadn`t signed up to the IVA.

Andy has mentioned `lack of communication and explanation` to the `customer`

It`s blatant miss - selling for me.

We hear that IP`s / IVA providers record client phone calls...Perhaps debtors should start recording the phone calls themselves, especially the initial `interview` and all calls before the proposal signing.

[Foggy]

I know what you are saying Goosed, but this is, as far as I am aware, a "solution" offered by one, possibly 2 firms. It would never have been discussed early on as it wasn't on the cards a year ago.

I agree that, in RARE instances, it might work out to the debtors advantage, however, fully disagree with it being foisted upon unsuspecting debtors and with some of the, apparent, bullying tactics we hear reported.

[UpToMyNeckInIt]

Goosed,

I understand where you are coming from - indeed you largely echo my own thoughts on the subject.

as Foggy says though: I am only aware of one IVA company doing this (at least, the only one mentioned on these forums). Furthermore, I draw a glimmer of hope from reports that one or two forum members have successfully got their IVA provider to back down on the issue.

Interesting as well that you mention mis-selling. Again, I agree totally: If secured loans / compulsory equity release are not mentioned in your IVA (forget the sales bull you may have been told you over the phone, it is what is in writing that counts), then you have an arguement for not only mis-selling, but 'breach of contract' common law applies IMO.

It is certainly an area that I shall be keeping a very close eye on over the next few Years, as it is the single most worrying concern for me.

It would be great to hear more accounts of the secured loan approach being successfully fended off, and maybe to balance opinion, interesting to hear from customers who benefitted from the secured loan option.

[Goosed]

There cannot be any scenario whereby a 15 year secured loan at 18% APR can ever be a better option for any debtor.

Yes, a secured loan at a reasonable interest rate over a short to mid term could possibly be a better option for someone having to release equity IF THEY HAVE BEEN OFFERED A REMORTGAGE AT SUB PRIME RATES BY THEIR BANK.

But that`s not the case is it???

Say someone has equity of 20k and they are forced into borrowing that amount at 18% APR over 15 years,

It would cost them £304 per month and they would pay back £54,555....£34,555 in interest.

Hardly benefitting the debtor and `helping them solve their debt problem` is it???

They`d just be back to square one except the unsecured debts they`d spent five years thinking they were paying off at a dividend agreed with creditors, would now be huge secured debt !!!

Plus anything could happen over that time, and the debtor has two avenues whereby they could lose their house if they cannot pay their mortgage and such a horrendous secured loan....The reason people take out IVA`s is because they want to keep their homes and the sales pitch tells them they will.

The only people benefiting out of this would be the loan companies and the unscrupulous IP / IVA providers who would try and force any `client` into such a predicament.

They obviously couldn`t give two hoots about their `clients`.

[UpToMyNeckInIt]

Goosed,

I think we need to bear in mind that everyone's circumstances are different, and that we are to some extent at the mercy of the wider economic situation at the time.

Remember as well, that these loans/remortgages are subject to affordability criteria (max 50% of my current IVA repayment in my case), so as much as the fees and interest totally suck, the product should be 'affordable'. (In my case therefore, loan would be capped at c£150pcm).

Personally, knowing what equity I currently have in my property, and the cost of rent for an equivalent house in my area, had I signed up to a pre-2010 protocol IVA, with a 'remortgage, or sell-up' type clause, a secured loan may be a salvation in that it allows me to keep my house, and be £400-£500pcm better off (differential between current interst-only mortgage payment vs typical rent for equivalent property, even factoring in the loan repayment).

OK, I have a typical 2010 protocol-compliant IVA, with the standard terms relating to equity release (so as you suggest, I will only contemplate a secured loan as the lesser of the 2 evils if having to otherwise contemplate a sub-prime remortgage).

If the news is to be believed, the housing market is on the up again (certainly seems to be the case here in the South East). So in 3-4 years time, when this clause will kick in for me, there has to be a fair possibility that banks will by then, have further relaxed mortgage-lending criteria. I may therefore have to face the prospect of one of these loans as an alternative to a sub-prime mortgage offer. I sincerely hope I am wrong of course, and that I can wrangle a 12-Month extension instead!!!

Fingers crossed!!!