Equity release in year 4, how much?

[Debt Monkey]

Any ideas how much equity I am likely to have to pay into my IVA? My agreement reads something along the lines of 'in the 4th year the debtors share of any equity shall be paid into the IVA by way of remortgage or sale.

Will I be expected to mortgage to 100%?

I bought the property in November 2004 for £137,500 and have a 95% mortgage of approximately £130,000.

Assuming my property is now worth about £155,000 based on sales of similar properties in the area and my outstanding mortgage is now £129,000 what can I anticipate paying over? I am not in my fourth year yet so assuming there is no further increase in the value of my property and my mortgage balance does not reduce much, just out of interest?


DM

[Adam Davies]

Hi DM
You will be expected to pay over as much as 85% of your equity in year four,upto a maximum of your original debt plus IP fee plus interest LESS payments made and equity releas.
However it is planned that the maximum that you can remortgage for will cost you no more than 60% of your disposible income.So for example if your IVA payments are £500 the max that you would be expected to pay extra for the remortgage will be £300 per month and this should allow for a max equity release of around 40k.
Hope this helps.
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[MelanieGiles]

As the terms of your proposal state "the debtor's share", then this assumes that you pay over as much of your share of the equity that you can possibly borrow. It is unlikely that you would be eligible for a mortgage at a higher rate than 85% whilst in an IVA, but you will need to demonstrate to your IP that you have made best efforts to raise the maximum. Is your property solely or jointly owned?

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[kah]

I will be due to retire by the time my IVA is completed. There will be equity in my property (about £100,000 by then) - I will have paid something like £46,000 to my creditors - and my original debt was 105,000. So I will then be paying a mortgage out of my pension - all my debt will be repaid - and I will be paying it for the rest of my life. All I will have saved will be the interest. Surely a debt management plan might have suited me better. Freeman Jones advised against it

[MelanieGiles]

Hi kah

Did you not also think this through yourself when you entered into the IVA? Equity release clauses should always be given careful consideration. How did you intend to address this important provision, and with a debt management plan for £105,000 you would also probably be paying for a very long period.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[Debt Monkey]

Hi Melanie, the house is joint owned but the iva is also joint with my wife, so if in year 4 I am still mortgaged to about 85% then there will be little equity to pay over, obviously by then the property is likely to of increased so there will be potential for some. If I want to keep my existing mortgage will it be possible to pay the equity element in some other way, loan from family or additional repayments for example?

DM

[MelanieGiles]

A family loan is a possibility, but extended payments can only be effected by varying the arrangement and seeking creditor approval.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk