Equity and remortgaging

[emma150]

I am coming to the end of my Iva. It states the following

Six months prior the completion there should be an attempt to release equity. However if I am unable to re-mortgage then my Iva should be extended up to 12 months.

Remortgaged would be the maximum of 85% loan to value
The increment cost of the re-mortgage would not exceed 50% of the monthly contribution.
There would be cap of 100% of the total equity realise.

If the amount of equity is under £5000, it does not have to be released and there would be no adjustment to the Iva term.

Does this mean if I have under £5000 equity will my Iva finish in 6 months time?

I have been given an illustration for a second charge mortgage loan for £4999 the payment is £90.96 per month for 15 years amount payable over £16,500 surely that’s not a good idea to take this out ?

[Foggy]

If there is less than £5k equity the IVA will finish at the originally agreed end point. If you have a 'protocol IVA' there are amendements due to covid which say not to have to try to remortgage but extend instead ( if more than £5k ). https://www.gov.uk/government/publicati ... a-protocol The extension will cost less than the remortgage in the long run !

[Cupcake08]

Foggy et al. Similar circumstances so hopefully okay to add to same thread.

I am confused by the Government Guidance and response of my IP. I am in a Protocol IVA with a large IP provider with equity clause. The Guidance on the Government website point 1.12 Covid 19 Guidance for Straightforward Consumer IVA Protocol appears quite specific.
1.12 No attempt should be made to realise a consumer’s home equity under paragraph 9 of the protocol during the pandemic unless the consumer agrees to proceed. The supervisor will retain the discretion to extend the IVA for up to 12 months in order to allow the consumer to complete their IVA. Voluntary release of equity can continue to be included in new proposals.

To be honest I hoped it would simply be a formality. However my IP advisor is stating that I originally agreed to pay back as much to my IVA as possible and I must complete the equity release process in full and to check my original agreement. I have not disagreed to go through process, I was querying the need to keep resubmitting documents such as mortgage redemption statements etc in support of the same process (this started in Sep 20. I know I cannot raise any finance as I explored this. The bottom line is whatever the guidance is, the process must be followed in full.

I am not rebelling but it seems to go against intent of the guidance unless I am misinterpreting it.

[Foggy]

Your equity release appears to have been triggered before the pandemic amendments, Cupcake, therefore the 'Go straight to 12 months extension' will not come into play here and the equity clause does have to be completed and hoops jumped through.

[Cupcake08]

Thanks Foggy.
Curious. The Covid advice was published by Government in April 2020 - agreement from IP Committee including my provider - this included the point I refer to. The guidance document was updated in September 2020 - wording is still the same.

My IP started equity process in September 2020 but did not progress beyond Mortgage statement. I otherwise had checked my ability to raise capital against my property according to protocol but this was not possible. My 5 year Anniversary is in May 2021.

What dates might you be referring to? Not in anyway a challenge to your opinion, I just am seeking understanding.

[Foggy]

Thanks Foggy.
Curious. The Covid advice was published by Government in April 2020 - agreement from IP Committee including my provider - this included the point I refer to. The guidance document was updated in September 2020 - wording is still the same.

My IP started equity process in September 2020 but did not progress beyond Mortgage statement. I otherwise had checked my ability to raise capital against my property according to protocol but this was not possible. My 5 year Anniversary is in May 2021.

What dates might you be referring to? Not in anyway a challenge to your opinion, I just am seeking understanding.

My apologies, Cupcake, with the recent change in year number ( and brain befuddling sciatica pain at the moment ) I mis-read. Yes, your release clause DOES fall into the period covered by the amendments, which you should push for to be followed. If they continue to refuse lodge a formal complaint which you can escalate to their regulatory body (the threat of which might make them re-think).

[Cupcake08]

Thanks Foggy, much appreciated. Hope you are feeling better soon.

[emma150]

Thank you so much replied back to the company that was organising the loan to say I didn’t want to go ahead and get this reply:

The term of 15 years is in line with what you proposed to your creditors when they accepted your IVA, whilst strictly this is what creditors expect they will potential consider a reasonable alternative suggestion from you. We would need to explain why an alternative offer is proposed; we can discuss this further if you wish to explore this option.

Alternatively, suppose you do not want to proceed at all irrespective of possible alternative terms. In that case, we will close our file and return your details to your IVA firm. You will then need to contact them to discuss how to move forward.

If you want us to close your file, we would like to assist you in the future. I note your current mortgage is with Precise Mortgage, and you are paying a rate of 5%. Once your IVA is satisfied, we have vast experience helping people achieve significantly better deals with lenders we have worked with for several years. With your agreement, we would suggest we contact you in approx. 12 months to discuss this further and help you move forward with potentially a better mortgage. At that point, we can discuss the options available to you and help you achieve a better mortgage – this would depend upon what you wish to do but could involve:

· A reduction in your mortgage payments.
· A reduction in your mortgage term.
· Both of the above.

Whilst we cannot guarantee exactly what can be done in the future as it depends upon your circumstances at the time plus the available products, we have for many years been able to help many customers with a previous IVA move forward. Often people who had a previously IVA feel like they have no other options than to stay with their current mortgage.

Please let me know how you wish to proceed.

This is totally stressing me out. They have obviously just took a valuation estimated around the area. Across the road and around the corner you could be paying £185,000 for a house the bit I live in is where social housing is and was made available so people could afford to buy. My estimate on my house is £108,000 with an £82,000 mortgage outstanding in joint names with myself only having an iva I think it is under £5k

[Foggy]

This firm has been instructed by your IP to investigate equity release, which they have done. It is not in their gift to apply the covid amendments. The way I see it is you thenk them and ask them to close their file. They will then tell the IP that you have decided not to proceed with equity release. In the meantime contact your IP direct stating thet you wish to proceed directly to the 12 month extension in lieu of equity relaease as per the covid amendments on the GOV.UK site.

Amendments apart, it does look like you have over the £5k if the company are using the new method (and, in my opinion, the incorrect method):

Market value (your figure £108k less mortgage of £82k leaves £16k --- 85% of which is £13.6k .. so £ 6,800 each.

The traditional way ( as was intended, as per annex 6 of the Protocol terms) would have been:

Market value £108k x 85% = £91,800. Less mortgage of £82k leaves £9,800 ... so £4,900 each

[emma150]

Many thanks they had my property as £110,000 making it £5750 equity can I give them a valuation from local estate agents. Which obviously they have got this from the internet and not visited the property.

[Foggy]

Yes, you can use your own valuations. Many IPs use things like Rightmove and such, which do tend to average out sales in a given area. We often make the point, also, that most of these previous sales are based on properties which have been staged for sale and regularly maintained. Most properties of those of us in an IVA are rarely maintained and are, as a consequence, of a lower value.

[Cupcake08]

Hi Foggy and Emma,

Re valuations I suggest checking with the IP. My IVA is with a large provider in NW. I was enquiringl about equity release and position with Government guidance and my provider is pushing back - hard. I have only been fact checking and they are hostile and try and shame you. I fully empathise with your situation and the stress you feel.

My IP provider stated they would not consider a valuation from an Estate Agent at this stage/ process, it had to be a RICS surveyor, regulated independent professionals. This is because Estate Agents valuation is 'an inflated sales price.

Long story short I did explore raising finance for full and final at beginning of 2020. The only offer via a broker who works with IPs and know the sector and the constraints was for a secure loan on a very high interest rate on variable terms, the overall cost far exceeded my original debt (nuts).

Under no circumstances would I pursue this. I would seek further independent help if pressurised.

The IP is arranging a valuation to provide independent verification of equity, for fairness as the equity clause may not be triggered. They have advised this may take some months. I will be following up as and will ask if I can get my own RICS survey if necessary as they have Covid secure wows and I think my IP has a single provider.

Best of luck - I will keep eye out for your updates. Am grateful for solidarity and advice of forum.

[kallis3]

Even though I knew we had more than enough equity I still had an estate agent round - told them I was having to move through work and needed a quick valuation.

[Cupcake08]

Kallis - I know where you are coming from. I have an Estate Agent Valuation albeit from Spring 2020 that my IP has on file - they would not permit this to be updated. I also had one from an Estate Agent when my IVA commenced - I obtained one exactly as you did (at the time).

In Emma's case I think it is worth checking with the IP whose valuation they will accept to establish equity - particularly if it is such a close call and Emma doubts the accuracy of what has been put forward to her - it may save the additional disappointment.

All the best.

[kallis3]

If you tell them it's for a quick sale it won't be an inflated valuation. Mine was done at the time of request for equity release.