Equity release

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Hannah.gd
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by Hannah.gd » Fri Feb 02, 2018 8:26 am
I am in my final year of an IVA, and have received a letter saying as per the terms of the iva i am required to release equity from my property. they quote the following extract from my proposal:-

“six months prior to the expiry of my iva (hereinafter referred to as the review date) i will attempt to release the net worth in my home by way of a remortgage.”

they are also requesting a copy of a recent valuation, mortgage and any secure loan statements to establish the level of equity, if any, that i am required to attempt to release for the benefit of my creditors.

i am just panicking and wondered how much equity i would be required to release. the iva and the mortgage on the property is in my name only, i am married but although my husband is not included on the mortgage or in the iva they take into account his income. i am assuming he is also entitled to a percentage of equity within the property because it is the marital home.

can anyone reassure me here? i owed 19k on entering the iva and have paid approx £6,600 into the iva. i have kept all payments up to date, and they say i owe £500 from one of the financial review undertaken two years ago. can anyone confirm how much equity i would likely have to release? my current mortgage is 252 per month and i owe approx £1800 on a ccj attaches to the property.

any help would be appreciated. as my and my husband are relying on our equity for a deposit to move when the iva is completed.
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Foggy
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by Foggy » Fri Feb 02, 2018 9:08 am
Much will depend on what version of the equity release clause you have. Before 2014 the standard clauses were that you reortgage or, failing being able to do this, you took an extension of 12 months on the IVA term. After 2014 they introduced the obligation to introduce equity by secured loan also. They will be after 85% of your share of equity, subject to the repayment adding less than 50% of the amount of your IVA payment to your current mortgage and not extending the current term (which, in itself, would limit the amount you could raise. Now, as the ownership of the house is in your name only, in law, your husband does not have a proveable share, only a potentional beneficial interest, which would normally need to be proven in court.

It is highly unlikely that you would be able to remortgage and probable that, ducking and diving by the IP allowing, you will get the extension. Dig out your paperwork and do not rely on quotes cherry picked by the IP.
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Hannah.gd
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by Hannah.gd » Fri Feb 23, 2018 10:16 am
thank you for your reply. i entered into my IVA in 2013 and am sure it’s the clause whereby i need to release the 85% Ltd by way of remortgage or if not able to an extension for 12 months. i will dig out the information later today to be sure. i have provided and up to date mortgage and ccj statmenrt together with a recent property valuation. property estimated value is £84k but potential selling value is £80k. i have today received a letter from the IVA stating the following:-

estimated value of property £84,000
85% LTV £71,400
Less:
Outstanding mortgage £34,821.29
Secured loan £1,987.80
Equity available £34,590.91

they state in the letter .... “you wil therefore be required to provide documentary evidence of at least two attempts to remortgage your property up to the maximum you are able to obtain not exceeding £34,590.91 and if successful introduce this into your arrangement before its completion.

Questions i was hoping the forum could answe for me...

1. The IVA company have based their calculations on the estimate property value rather than what the property would potentially sell for, can they do this?

2. They have also not taken into account any early repayment charges from my current mortgage provider, do they need to consider this?

3. Where do i attempt to obtain a remortgage from and for how much? Some guidance is needed if someone can help point me in the right direction?

4. Preferrably i wish to avoid the release of equity as we are hoping to sell and move in two years time.

5. Does this equity release clause allow the IVA to obtain all of the equity available if i am able to remortgage for the full amount of equity available? because originally i only owed £19k without interest. I am concerned they will take more than i originally owed, can they do this because of the equity clause?

I am quite anxious about all this because i didn’t fully understand what i was signing up for when i went into this IVA.

Any further help would be appreciated.

Thanks
Hannah
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Foggy
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by Foggy » Fri Feb 23, 2018 10:30 am
1. The IVA company have based their calculations on the estimate property value rather than what the property would potentially sell for, can they do this?
Yes, the calculations are based on Open Market Value. It makes little difference as you are unlikely to remortgage anyway, so the extension will apply and no valuatuion will get you below the £5k trigger point.

2. They have also not taken into account any early repayment charges from my current mortgage provider, do they need to consider this?
Again, the amounts are irrelevent, as you will probably be refused a remortgage.

3. Where do i attempt to obtain a remortgage from and for how much? Some guidance is needed if someone can help point me in the right direction?
Current lender is often the first try and many use online applications from High Street lenders with a screen print of a refusal to proceed --- the application usually stops as soon as they ask about the IVA. The amount will be determined, really, by the repayment and term. You cannot usually add more then 50% of your IVA payment to the existing mortgage payment, nor extend the term, depending on the clauses you have in the agreement.

4. Preferrably i wish to avoid the release of equity as we are hoping to sell and move in two years time.
Re-mortgaging is unlikely to succeed.

5. Does this equity release clause allow the IVA to obtain all of the equity available if i am able to remortgage for the full amount of equity available? because originally i only owed £19k without interest. I am concerned they will take more than i originally owed, can they do this because of the equity clause?
They can take an amount to cover the full original debt, plus fees and possible statutory interest, less IVA payments made.
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Hannah.gd
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by Hannah.gd » Fri Feb 23, 2018 10:33 am
thank you for your reply, much appreciated ☺️ shall let u know how i get on. will contact my current mortgage company today
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Hannah.gd
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by Hannah.gd » Fri Feb 23, 2018 10:50 am
what amount of remortgage should i attempt to apply for?
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kallis3
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by kallis3 » Fri Feb 23, 2018 11:09 am
I doubt you will be able to get a remortgage. Yes, you have to try and send refusals to your IP. You will probably have to continue on for a further 12 months in lieu of equity.
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Foggy
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by Foggy » Fri Feb 23, 2018 11:22 am
Hannah.gd wrote:
what amount of remortgage should i attempt to apply for?


I would apply for the maximum the IP has calculated .. more likely to get refused as well !
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Hannah.gd
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by Hannah.gd » Mon Feb 26, 2018 12:46 pm
Thanks for your help. I've taken this extract from my proposal.

4.6 states; if I am unable to obtain a re-mortgage for any reason, this will not be viewed as a failure to comply with the terms of the IVA and my Supervisors will have the discretion to consider accepting one of the following alternative proposals;

- a third party sum equivalent to 85% of the value of my interest in the property, or
- up to 12 additional monthly contributions, with the aggregate sum paid to the Supervisors being limited to 85% of my interest in the property

So does this mean if I cant re-mortgage, I just pay up to an additional of 12 monthly payments of what I pay into the IVA currently or do they expect you to pay more?
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Foggy
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by Foggy » Mon Feb 26, 2018 12:59 pm
The usual scenario these days is the 12 month extension, which is paid at the normal monthly rate.
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Hannah.gd
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by Hannah.gd » Mon Feb 26, 2018 1:02 pm
Thanks, I am just concerned that won't be the case :-/

I've just been in touch with my current mortgage provider and they do not offer further lending. any recommendations on other companies, or anyone online is sufficient is it? or do I go via high street lenders?
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Foggy
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by Foggy » Mon Feb 26, 2018 1:07 pm
Hannah.gd wrote:
Thanks, I am just concerned that won't be the case :-/

I've just been in touch with my current mortgage provider and they do not offer further lending. any recommendations on other companies, or anyone online is sufficient is it? or do I go via high street lenders?


It depends on what your IP will accept ---- many are happy with screen shot refusals from online enquiries ( which often stop right at the start, due to the IVA) .
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