I'm not sure this equity release clause is necessarily flawed.
Barrat's interest is in maintaining their security (25% of the market value). If the home has appreciated significantly since the original mortgage was taken there is the potential to release equity without comprimising Barrat's security. Contrary to Mike's post this would require a Deed of Postponement (agreed to by Barrat's) which by way of a ballpark figure could add £150 plus VAT to the solicitors costs and possibly an admin fee to Barrat's.
I disagree with Mike's reading on the clause regarding new mortgages. I take this to mean that their permission would be required which is why those who run such schemes tend to have conveyancing departments. It would not be realistic or reasonable to refuse all remortgages for a ten year period. They control the process and their security by agreeing or refusing the Deeds of Postponement presented by the remortgagors solicitor.
I also suspect that the restriction placed by the IP is for the purposes of control as well; i.e. their permission is needed prior to the remortgage completing. Otherwise it's effecively a 100% equity release clause which seems unlikely.
Mike also mentions that it might be difficult to raise equity due to IVA remortgage criteria at the moment. The LTV available depends on how the lender assesses the risk. We placed a second-year IVA case at 'near-prime'(i.e. the lender saw the risk as very limited) last week and the higher than usual LTV available at this level could make the equity release viable. This will not happen in all cases but matching the right case to the right lender makes a big difference.
Key action points here that could unlock the door might be:
1 - Establish how much the property has appreciated in value since the original mortgage.
2 - Clarify with the IP the purpose of their 'restriction'.
3 - Discuss with Barrat's conveyancers their position on what they do and do not consider threatens their security on the property in terms of equity release based on current market value.
Andrew Graveson
Independent Mortgage Broker & MD Bright Oak Debt Management
andrew@brightoak.co.uk
www.brightoak.co.uk
