Equity Release Confusion ??

debtfree2016 · 21 November 2014 at 3:40PM

Really confused with this , 'If the valuation shows that 85% of my interest in the property (after deducting my share of the mortgage and/or secured loans referred to above) is less than £5000 (net of all costs to take out a new mortgage) then I need contribute no more to the arrangement in respect of the property. If that valuation shows that 85% of my interest in the value of the property (after deducting my share of the mortgage and/or secured loans referred to above) is £5000 or more (net of all costs to take out a new mortgage loan), then I will seek to remortgage my interest in the property my interest in the property and introduce this money into the argument. My Mortgage is £210k and property value £240k so LTV 87.5. In simpleton terms please help ????? I have spoken to my IVA company and have given these figures have stipulated based on these figures my IVA will end after 5 years and there will not be an extension of 12 months ????

longtermplanner · 24 November 2014 at 10:31AM

On those figures, and the IVA company may think the value should be more which would change things, than you wouldn't have to remortgage.

Can you quote the exact term in your IVA which refers to a possible extension?

debtfree2016 · 24 November 2014 at 1:19PM

Long winded but I hope you can assist

"The remortgage amount will be a maximum of 85% of my LTV, The incremental cost of the remortgage, including cost of any new repayment vehicle, will not exceed 50% of the monthly contribution at the review date. The net worth released will not exceed 100P in the £ excluding statutory interest. The remortgage term does not extend beyond the later of my state retirement age of the existing mortgage term. The amount of the money introduced into the arrangement will be the mortgage proceed less the costs of the remortgage, including any cost to redeem any existing mortgage and/or secured loan. The increased amount that I have to pay because of the remortgage will be deducted from the remaining monthly contributions in the arrangement. If the increased amount that I have to pay at any time following the remortgage means that the required contribution to the arrangement falls below £50 per month, monthly contributions are stopped, and the IVA is concluded. I will provide a broker or prospective lender with my written consent authorising them to keep my supervisor fully informed of progress throughout the re-mortgage process. If I am unable to obtain a new mortgage, this will not be viewed as a failure to comply with the terms of the IVA and my supervisor will have the discretion to consider accepting one of the following alternative proposals: A third party sum equivalent to 85% of my interest in the property, or 12 additional monthly contributions ( with the aggregate sum paid to the supervisor being limited to 85% of my interest in the property)" Thanks for your help

debtfree2016 · 25 November 2014 at 2:56PM

Any ideas?

longtermplanner · 25 November 2014 at 4:53PM

Thanks.

If there is no other term relating to a 12 month extension, then it looks to me as though you should be safe. You are below 85% threshold (unless IP disputes your valuation) so you don't have to remortgage. This is not being "unable to remortgage" so the 12 month extension doesn't apply.

debtfree2016 · 26 November 2014 at 10:15AM

Thanks Longtermplanner

TBagpuss · 27 November 2014 at 2:45PM

I don't think the 85% is anything to do with your lTV.

It talks about 85% of the value of your interest.

The house is worth £240K, and the mortgage is £210K, so the value of your interest is £30,000. 85% of that is £25,500, which is more than £5,000.

If the house is in joint names then the figures would £120K - £105K = £15K, 85% of which is £12,750 which again is over £5,000.

So I think what they are saying is that they would expect you to try to re-mortgage to release some of that equity to pay your debts.

If you re-mortgage then you are allowed to pay the costs of re-mortgaging before paying the balance to the creditors, and the monthly amount you pay during the extension will be reduced by the difference in your current mortgage payments and the new payments.

UpToMyNeckInIt · 27 November 2014 at 10:02PM

debtfree 2016, you are correct.

A £210K mortgage against a property worth £240K = 87.5%LTV.

The equity release clause only requires you to re-mortgage to max. 85%. Well you are already 2.5% over that, which means that you have no releasable equity.

Therefore, if your IVA contains no 12-Month extension (lucky you!), then your IVA should conclude in Year 5.

Hope that reassures you.

Equity Release Confusion ??

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