How to calculate equity release for an IVA

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Cherrybea
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by Cherrybea » Wed Feb 14, 2018 10:52 am
We have had our own valuation of our home today as we don't agree with the online valuation aperture are using.

It has come out as £130000-£135000. Assuming they will take the highest figure I have calculated the following:

85% LTV = £114750
Balance on mortgage is £105500
Equity = £9250

Does this seem right? Assuming it is we go into a 6th year paying £500 per month (£6000 over the year). Would we continue at this rate based upon having over £6000 equity or is the equity £9250 - £5000 deminimis and therefore £4250?
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Foggy
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by Foggy » Wed Feb 14, 2018 11:16 am
Aperture use a different (and, in my opinion, incorrect method of calculation). They will do it thus:

Market value £130,000 less secured lending of £105,500 = £24,500 x 85% = £20,825 equity to be released.

However, the trigger point for the clause should still use the correct method ( the clauses have been badly written ) :

85% LTV = £114,750
Balance on mortgage is £105,500
Equity = £9,250

BUT .... if the property is jointly owned and only one of you is in the IVA your share of equity is £4,625 --- under the de minimis and the clause should not be triggered.

Unfortunately the way they do it can be interpreted from the clauses as they are usually drafted, even though the intention is clearly not to use this method, and they will stick to their guns. But, this should be a moot point as you will, in all probability, not be able to remortgage and will get a 12 month extension. They might try to force a secured loan on you but, unless your protocol is post 2014 (have you agred to any variations ?) they cannot -- a secured loan is not the same thing as a remortgage.
Cherrybea
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by Cherrybea » Wed Feb 14, 2018 11:43 am
I think they have been using the correct method as the original value they worked on was a property value of £138000 and they said we had £10,000 equity.

Will they go for the higher property value? Our values said this is the highest they think they could push to for a sale but £130000 was more realistic.
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Foggy
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by Foggy » Wed Feb 14, 2018 12:08 pm
Cherrybea wrote:
I think they have been using the correct method as the original value they worked on was a property value of £138000 and they said we had £10,000 equity.

Will they go for the higher property value? Our values said this is the highest they think they could push to for a sale but £130000 was more realistic.


If you supply your valuations they should use yours if the source is more reliable (local valuers who visited the property or estate agents ads for identical property nearby are better than online valuations some IPs use). Most equity release clauses are written long these lines " You are required to obtain valuations" .... not the IP.
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Lisa Thomas
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by Lisa Thomas » Wed Feb 14, 2018 12:31 pm
When you say 'we' are you both in interlocking IVAs?

If so it is possible with your calculation that you each have less than the £5k minimum amount.

You will need to argue your stance with the Supervisors as Foggy has stated.

Might even be worth getting a specialist insolvency solicitor to argue it for you, assuming their costs will be less than the years worth of savings they might be able to get you.
Cherrybea
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by Cherrybea » Wed Feb 14, 2018 12:49 pm
My husband and I are in a joint Iva so I take it the £5000 de minimise is shared between us.
Cherrybea
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by Cherrybea » Wed Feb 14, 2018 12:55 pm
Aperture said we will go into a sixth year based upon an equity of £5068 (if we use the lowest estimate). My understanding was they could only ask for the £68 not a whole sixth year of payments equating to £6000!
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Foggy
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by Foggy » Wed Feb 14, 2018 1:22 pm
Cherrybea wrote:
Aperture said we will go into a sixth year based upon an equity of £5068 (if we use the lowest estimate). My understanding was they could only ask for the £68 not a whole sixth year of payments equating to £6000!


No -- the de minimis level is a trigger point not a disregard or limitation. The 12 months is 12 months at usual payment level --- on which the creditors take the hit as it it almost always less than they would have got if you could remortgage and is usually the best outcome. Pretty close though -- if you could lose that £68 -- well £69 -- there would be no extension at all.
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Lisa Thomas
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by Lisa Thomas » Wed Feb 14, 2018 1:33 pm
There is no such thing as a joint IVA, they will be interlocking.

As Foggy states you need to prove your equity is each under £5k for the clause not to apply.
Cherrybea
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by Cherrybea » Wed Feb 14, 2018 2:08 pm
Ok so an interlocking Iva. Does this mean more than £5k between us triggers the equity clause or £5k each?
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Foggy
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by Foggy » Wed Feb 14, 2018 2:20 pm
Cherrybea wrote:
Ok so an interlocking Iva. Does this mean more than £5k between us triggers the equity clause or £5k each?


To muddy the waters further, some IP's accept that it is £5k each -- after all, the equity clause specifically refers to "your share" of the equity and they are individual arrangements, just interlocking. BUT, some say it is £5k between the two, treating the IVA's as one.

To be honest, Aperture are looking a bit inconsistant here, so it woukld be impossible to call. Out of interest, was your IVA started with Aperture / Grant Thornton, or were you transferred in from another firm ?
Cherrybea
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by Cherrybea » Wed Feb 14, 2018 2:28 pm
It was with Grant Thornton but a third party are dealing with the equity release. In month 55 now.
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Foggy
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by Foggy » Wed Feb 14, 2018 2:32 pm
Cherrybea wrote:
It was with Grant Thornton but a third party are dealing with the equity release. In month 55 now.



Select use the generally accepted methods for the equity amounts, but I do not know their policy on interlocking de minimis amounts.
Cherrybea
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by Cherrybea » Wed Feb 14, 2018 3:00 pm
So select have agreed with our valuation and after a quick calculation have said there is not enough equity to release.

They are informing aperture. Does this mean no sixth year?
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Foggy
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by Foggy » Wed Feb 14, 2018 3:04 pm
Cherrybea wrote:
So select have agreed with our valuation and after a quick calculation have said there is not enough equity to release.

They are informing aperture. Does this mean no sixth year?


As long as Aperture agree ( which they should) that will be the end of the equity release question --- no extension and no release.

It would seem (and I am only guessing here) that Aperture have relegated the equity release questions to Select, who, I am pleased to say, interpret the clauses as I believe they were intended. This would be a good move for us as well as for Aperture and could go a long way to getting them back on track.
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