Why am I having to pay an equity release loan before remortgage?

[Michael Peoples]

Apparently very few people qualify for secured loans and they must meet strict conditions. Anyone who does not qualify gets their extension but if no one even tries to release equity creditors will stop granting the extensions and could go back to demanding the sale of homes.

I am not blindly defending secured loans but there are people on this forum who have signed up to releasing equity with no intention of doing so. A remortgage over the remaining term seems to be acceptable but a secured loan over the same period is not, even if the overall payments are less!

Goosed talks about morality yet he feels that people who have equity which was promised to creditors and have the ability and affordability to release that equity, should refuse to do so and try and rely on wording. Promising equity to creditors to encourage them to accept your IVA but with no intention of releasing that equity is hardly moral.

[Goosed]

font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by Michael Peoples

Apparently very few people qualify for secured loans and they must meet strict conditions. Anyone who does not qualify gets their extension but if no one even tries to release equity creditors will stop granting the extensions and could go back to demanding the sale of homes.

I am not blindly defending secured loans but there are people on this forum who have signed up to releasing equity with no intention of doing so. A remortgage over the remaining term seems to be acceptable but a secured loan over the same period is not, even if the overall payments are less!

Goosed talks about morality yet he feels that people who have equity which was promised to creditors and have the ability and affordability to release that equity, should refuse to do so and try and rely on wording. Promising equity to creditors to encourage them to accept your IVA but with no intention of releasing that equity is hardly moral.

Not quite true Michael,

I entered my IVA fully intending and expecting to release equity as I signed up to and still do,

As long as it's via the means I had explained to me.

I do indeed have a problem with being forced into an expensive and lengthy secured sub prime loan that I had no inkling I could be forced into, if that were to happen, and I don't think anyone should have to.


That is all.

BTW, you and your fellow IP's are the people that draft the proposal wording and give the advice, or mis advice as it can sometimes be by all accounts.

IP`s are the ones who are trying to move the goalposts during IVA`s and evidently some of you don't like it when challenged.

[Adam Davies]

Hi

Whilst IPs draft the proposal it is creditors that insist on conditions that can be added in at the creditors meeting stage and debtors that agree them.

I can see trouble ahead for the industry if secured loans become the norm instead of mortgage equity release, it's not a problem if this was clearly explained prior to acceptance by both parties but I fear that it has not been and could well be the next hot potato after the PPI fiasco

Regards

[Goosed]

Andy,

When I post about IP's 'trying to move the goalposts', I mean when they try and force the expensive, lengthy secured loans instead of the agreed extension on debtors when the debtor is unable to remortgage.

Or in Rose68's case before she even tries to remortgage because they know she won't get a remortgage at the moment.

Just because there are those of us who oppose this Michael chooses to accuse us of intending to never release equity.

What a load of tosh...

I'll bale out now, I wish you all well in your IVA's and hope you all navigate the choppy waters to come safely.

Hopefully see you all out the other side,

Take care.

[Michael Peoples]

It is not an agreed extension but a concession offered by creditors if a client cannot raise equity. I do not know Rose's situation but she may qualify for a remortgage or indeed she may not even qualify for a secured loan. If DFD are having a broker look at each case that is their job and they are only acting in the best interest of the debtor and creditors alike.

It amazes me that posters here cannot see how a secured loan can sometimes be better for the client than a total remortgage. However, when the remortgage market frees up and they are obliged to remortgage and lose their excellent tracker deals, they may change their tune!

[nickjohn]

I thought the pre agreed concession was 12 extra payments when equity release through re mortgage was not available..

I know I am not the sharpest knife in the drawer but I still don't see how a secured loan at an interest rate of between 15 and 20% can be a better proposition than a second mortgage for the same amount..
I understand the argument of a secured loan over a complete re mortgage but have always been led to believe that a full re mortgage was always a last resort anyway..

People keep coming up with this defence that the Ip is only doing their job and trying to get the best return possible for the creditors but if that were truly the case then they would have factored into the IVA the option of a secured loan and they would not be so willing to give away such large chunks of PPI reclaims ( on average 50% of a PPI re claim goes in fees )..

[nickjohn]

font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by Michael Peoples


It amazes me that posters here cannot see how a secured loan can sometimes be better for the client than a total remortgage. However, when the remortgage market frees up and they are obliged to remortgage and lose their excellent tracker deals, they may change their tune!

As has been said before it amazes the posters that an IP can negotiate a legally binding contract giving 2 option at the end of year 5 ( re mortgage or 12 extra payments) and they still come along with a third of a secured loan saying it is a good option, surely given all the options the extra payments wins every time....

[Rose68]

My whole problem with all this is that the goal posts have completely moved. I have been counting down the months down to my 60th payment and then get this thrown at me 2 weeks before the last payment! As I have quoted in an earlier post, I haven't even been given the opportunity to remortage.
This has all been presented as my only option.

I thought the purpose of an IVA was to get you out of debt? Instead, I am facing the rest of my mortgage life (15 years) with a high interest loan dragging us down.

[nickjohn]

If you believe your IVA allowed for 12 extra payments if you could not re mortgage then stick to your guns and push for extra payments.. Remember that an IVA is a legally binding contract and cannot be changed without both parties full agreement the ip cannot just change things when he wants..

[nickjohn]

If IPs keep pushing for secured loans at year 5 then the question of how much equity you have will become irrelevant as they will just say make payments for 5 years then take out a loan to make a lump sum final payment..

[nickjohn]

font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by Michael Peoples

Apparently very few people qualify for secured loans and they must meet strict conditions. Anyone who does not qualify gets their extension but if no one even tries to release equity creditors will stop granting the extensions and could go back to demanding the sale of homes.

I am not blindly defending secured loans but there are people on this forum who have signed up to releasing equity with no intention of doing so. A remortgage over the remaining term seems to be acceptable but a secured loan over the same period is not, even if the overall payments are less!

Goosed talks about morality yet he feels that people who have equity which was promised to creditors and have the ability and affordability to release that equity, should refuse to do so and try and rely on wording. Promising equity to creditors to encourage them to accept your IVA but with no intention of releasing that equity is hardly moral.

I hate to sound like I am repeating myself but when I had the IVA process explained to me the area of re mortgage was covered.
However, I also explained my own position in as much as I have a mortgage which was granted when I was making a lot more than I am now and that there was no way I could get an extension and that if I had applied for my mortgage at the time I took out my IVA I would not even get that due to my reduced income.
I was told this was not unusual and the norm was for an equity release clause to be included along with the proviso that should I not be able to re mortgage then 12 extra payments would be made.
This is what I signed up for and was agreed.
You keep saying that a secured loan is cheaper then re mortgage but I still don't understand how you come to this as the interest rate on a secured loan seems far higher than that of a second mortgage.
In my own situation whichever way I look at things making 12 extra payments is the cheaper option.

You say secured loans have a strict loan criteria but I do not believe they are as strict as a re mortgage, all the loan company is looking for is a track record of regular payments, this is shown by the IP as you have made regular payments for at least 5 years, couple this with the fact that the loan repayments are about half those of your IVA payments then the loan company are quite happy to agree.
On the other hand the criteria for a mortgage is quite different, being in an IVA goes against you immediately, when they calculate you ability to repay they do not look at what you have been paying into the IVA they factor in interest rate rises etc and job stability and also the LTV of your property, this it what makes it harder to get a re mortgage over a secured loan.

If the creditors had said to me day one I had to make 5 years of payments at £951/mth then either re mortgage or sell my home to release equity I would have sold up day one (as I knew there was no way I could get a second mortgage), paid what I could and gone BR. I would have been better off 6 years down the line...

I think you are being over critical of those who want to comply with the terms of their IVA and take 12 extra payments when they are refused a re mortgage, moralistically is it morally right for an IP to pressure clients into accepting modified terms and conditions once the IVA is in force, which benefit the IP, especially after they are the ones who drafted the IVA, finalised the IVA, presented the IVA to creditors and got paid handsomely for doing so.

[MelanieGiles]

If and when the mortgage marketplace relaxes towards people in IVA's, then this may see the time when secured loans become a viable option for persons faced with expensive re-mortgages. Until then, I prefer to treat a re-mortgage as a re-mortgage and not consider a secured loan for any of my clients except in exceptional circumstances.

Having just recently lectured at an R3 conference in Manchester on the subject of IVAs, it is clear that many other influential members of this profession also share my views.

[luluj]

A sensible approach Mel ... Totally agree!

[UpToMyNeckInIt]

Rose: I assume you don't have an outdated draconian clause in your IVA requiring equity release to meet your minimum dividend requirement. (Ie: where you might otherwise have to consdier selling the house if you could not remortgage - in which case a loan may be the lesser of 2 evils). I assume as well, that you have complied with any other attempted equity release provision in your IVA.

Whilst we don't know your exact circumstances reagrding the amount of equity in your property or your affordability criteria, if there is no mention of 'secured loans' in your IVA, then you are well within your rights to query and fight this. I recall 2 other forum members - both with DFD, who have aparently successfully done so.

It might also be worth enquiring at your nearest CAB. I know they used to have a service where you could see a solicitor free of charge. Then you could at least take your IVA contract along, get an impartial professional legal opinion on the exact contract wording, and where you stand with DFD requring you to do this.

I really don't envy your position, and I sincerely hope you get a satisfactory outcome.

Mel: Glad to see that this sort of thing seems to be relatively isolated - CURRENTLY, but still a worrying issue for many IVA customers who are home-owners: As you touch upon, there could well be a time when more of these sub-prime mortgages become more widely available (sooner rather than later I fear). IVA customers cannot necessarily assume 12-Month extensions will be the norm come equity release time in 3-4 Years: Some of us may have to weigh up the pro's and con's of either accepting a sub-prime mortgage offer, or considering one of these loans if that works out as a more affordable alternative.

[nickjohn]

Whilst the sub prime mortgages may become the norm as markets pick up there is still the issue of affordability.
The IVA has a set criteria of how much you can pay in mortgage payments after a re mortgage. If the sub prime market is offering mortgages at a higher than standard interest rate then they will fail as the overall mortgage repayments will be higher than the guidelines set out in your IVA.
I understand that loan repayments will not be subject to the same criteria but I may be wrong and would welcome feedback from an expert on how loan repayment affordability calculations fit compared to a re mortgage.