Equity Release Question

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northumbrian69

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Post by northumbrian69 » Sun May 30, 2010 8:50 pm
Like a lot of others on the forum, I get really confused by equity release and all the hidden little clauses that can really harm an IVA.
One thing I don't understand is, "how do you calculate available equity"
If for example your house is worth £150,000 and the outstanding mortgage is £120,000, a mortgage of 85% LTV would only raise £127,500, which leaves £7,500 available.
Would creditors accept £7,500 or force the sale of the house to raise £30,000.
This equity release clause frightens the life out of me because there are so many conflicting opinions, some of which suggest creditors can force the sale of a house if a remortgage can't be obtained [:(!][:(!]
Can anyone give a difinitive answer to my question [?][?][?]
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kallis3

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Post by kallis3 » Sun May 30, 2010 8:56 pm
It bothers me as well! We are supposed to release £28k between us but I doubt if we will be able to.

Check your proposal/chairmans report. Neither of ours states that we will have to sell the house.
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MelanieGiles

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Post by MelanieGiles » Mon May 31, 2010 12:34 am
It really does depend upon the terms of your own particulare agreements - if in any doubt take advice directly from your IP to be sure - I would suggest in writing.
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northumbrian69

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Post by northumbrian69 » Mon May 31, 2010 4:22 pm
My Chairmans Report states: "the debtors must remortgage their home in the fourth year of the agreement and make the proceeds available for the benefit of their creditors. Monthly payments may then cease in order to accomodate the increase in mortgage payments, and I will take steps to conclude the arrangement, having first written to creditors to ensure that there are no objections to the arrangement being concluded early. Should the debtors be unable to realise an equity in this manner, the Supervisor must convene a general Meeting of Creditors to consider the debtors options"
Sounds really open ended to me, I'm really worried [xx(][xx(][xx(]
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MelanieGiles

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Post by MelanieGiles » Mon May 31, 2010 5:44 pm
It is woolly - but it basically means that if you cannot remortgage - either because there is no equity, or you cannot find a lender willing to lend, that your creditors must be consulted about the way forward. This is likely to be the payment of a further 12 months payments - but only if there is equity. If no equity, the arrangement ought to conclude at the end of the fifth year.
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northumbrian69

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Post by northumbrian69 » Tue Jun 01, 2010 4:52 pm
This takes me back to my original question of "how is available equity calculated"
If for example your house is worth £150,000 and the outstanding mortgage is £120,000, a mortgage of 85% LTV would only raise £127,500, which leaves £7,500 available.
Would creditors accept £7,500 or force the sale of the house to raise £30,000.

I would hope that it is the 85%LTV example and not the 100% example, this is the bit I don't understand, I would be grateful if anyone can clarify this for me [:)][:)]
MelanieGiles wrote:

It is woolly - but it basically means that if you cannot remortgage - either because there is no equity, or you cannot find a lender willing to lend, that your creditors must be consulted about the way forward. This is likely to be the payment of a further 12 months payments - but only if there is equity. If no equity, the arrangement ought to conclude at the end of the fifth year.
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Cath

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Post by Cath » Tue Jun 01, 2010 5:40 pm
Does your proposal state remortgage at 85% LTV? If so, your calculation is correct and they wouldn't expect you to raise 100%, you would probably never be able to do that anyway as the days of 100% mortgages are in the dim and distant past.
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northumbrian69

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Post by northumbrian69 » Tue Jun 01, 2010 6:14 pm
There is no mention of 85%LTV, I have e'mailed the following questions to my Customer Service Team:

•When in the 4th year is the equity release clause invoked
•What percentage LTV is required to release equity, my understanding is the maximum is 85%LTV but this is not confirmed in our arrangement documentation
•What happens if there is no equity available
•What happens if there is equity available but we can't find anyone to give us a remortgage


I will report back when I get an answer, hopefully something positive [:(][:(]
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Adam Davies

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Post by Adam Davies » Tue Jun 01, 2010 6:23 pm
Hi
You will retain at least 15% of your house value so you will try to remortgage upto 85% LTV and try to release 7500 pounds. Under new protocol creditors would not insist that you sell your house and this should really apply to all IVAs where the equity release is due
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northumbrian69

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Post by northumbrian69 » Wed Jun 02, 2010 5:27 pm
I e'mailed my Customer Support Team late yesterday, super service got a reply before 10:00am this morning:

I have to try and get a remortgage in April 2011 which is the 4th anniversaty of my arrangement

If I can't arrange a remortgage or there is no equity available I received the following answer:

You must attempt to realise the maximum amount affordable to you, However if there is no equity available to you or your application for a re mortgage is unsuccessful Grant Thornton must convene a meeting with your unsecured creditors and request this asset is excluded from your arrangement.

If I read this answer correctly, if I can't arrange a remortgage or there is no equity available my Supervisor will request the equity release clause to be removed. I would guess that my creditors will try and put the squeeze on for extra payments but it's good news that my Supervisor will ask for exclusion of the clause.
I feel a lot happier now [:D][:D][:D]

Grant Thornton get their fair share of bad reports on the forum, I must say up to now they have been 'absolutely marvellous' in the way they have handled our arrangement.
I don't know if anyone from GT subscribes to the forum, if they do:
Many thanks to Andrea at GT for her prompt and helpful reply. [:)][:)]
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orange

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Post by orange » Wed Jun 02, 2010 5:55 pm
we had no equity and went for a final year of payments .only 13 payments left
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northumbrian69

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Post by northumbrian69 » Wed Jun 02, 2010 8:34 pm
I thought if there was no equity that the arrangement finished at the end of year 5 [?][?]
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MelanieGiles

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Post by MelanieGiles » Thu Jun 03, 2010 12:19 am
You don't have the 85% loan to value provision in your case, so it is not relevant and creditors are expecting you to raise the full amount possible from a re-mortgage. IVA protocol provisions do not apply to non-protocol cases and any attemps to apply the protocol can only be done via specific variation.
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northumbrian69

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Post by northumbrian69 » Thu Jun 03, 2010 7:07 pm
I'm confused[?][?]
At my age and in the current financial climate I would guess that it's highly unlikely I would be able to raise even an 85%LTV mortgage, so the full amount possible from a remortgage would be zero.
As I have a non-protocol IVA, what happens if I can't raise a remortgage, my Supervisor tells me he will request the asset be removed from the arrangement if this happens, is this the likely outcome [?][?]
MelanieGiles wrote:

You don't have the 85% loan to value provision in your case, so it is not relevant and creditors are expecting you to raise the full amount possible from a re-mortgage. IVA protocol provisions do not apply to non-protocol cases and any attemps to apply the protocol can only be done via specific variation.
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Adam Davies

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Post by Adam Davies » Thu Jun 03, 2010 7:34 pm
Hi
The likely outcome is that they will either conclude your IVA at year five or extend it by twelve months following a variation meeting.
Regards
Andam Davies
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