release of equity near end of IVA

[kal]

Hi,
My IP tells me that they may ask me to release equity in my house near the end of the IVA (4th yr?)...if it is accepted.
They haven't offered it in the deal, but say that may be one of the modifications and to be prepared.
What I want to know, is...there is little equity now in the house now, so what happens if i still don't have any or very little.
Also how much of the equity would they take - say we had 20k, would they take all of it - surely then I would end up with a higher mortgage for the life of it, is this just something I will have to live with.
Sorry if these seem silly questions - just need to be prepared for Monday.
k.

[Oliver]

Hell Kal and welcome.

In an IVA you will retain ownership rights of your property (as opposed to bankruptcy). However, in lieu of this you will be expected to pay to the best of your ability during the IVA. This will usually mean that you are expected to release up to 85% of your propoerty's value.

An example of this would be that if your house was worth £100k and you had a mortgage of £70k on it then you would likely be expected to release up to c85% of the properties value, which in this instance would be c£15k. (85% of £100k = £85k / less mortgage currently in place £70k = £15k).

[Adam Davies]

Hi
The maximum that you will be required to release will be the difference between 85% of the house value and your outstanding mortgage/secured loans.If you are entering into an IVA on your own and your partner is not then you will only have to release your share of the equity[normally 50%].If the amount that you are requied to release is 5k or less than you will not have to release this.Finally the maximum that you can release must not increase your mortgage payments by more than 50% of your IVA payment.
To explain this easily I'll give an example
House value 160k,85%ltv is 136k,you have an outstanding joint mortgage of 120k,so the equity to be released is 16k.Your partner is not party to an IVA so you will only be releasing your share,8k
Hope this helps
Regards

[kal]

Thanks for that info.
It is a joint IVA, so both of us will be liable for the equity.
i shall hope that house prices do not go up drastically in the next 5 yrs.
k.

[jpj]

you would still kind of benefit Kal....If your house went from 100k to 200k you would be able to keep 30k equity instead of 15k equity! (or maybe even more as there would be a limit as to how much your mortgage could increase by in relation to your IVA payments,as mentioned by Andy)

[MelanieGiles]

Why is your IP not presenting this under the new IVA protocol which was introduced in February 2008? This would make it clear that you are prepared to have the property revalued during the final year of the arrangement, at which time you undertake to seek a remortgage based upon 85% loan to value and use any residual equity after the payment of your mortgage and any other charges to pay into the IVA, subject to a minimum figure of £5,000 before you need to pay anything.

I personally would always present my proposals as protocol compliant now, as it is sure to be modified.

[Soulgrowth]

In my IVA McCambridge Duffy fixed the equity release in the 4th year at a figure of £25,000. How were they able to do this I wonder?

Debbie

[MelanieGiles]

Because your IVA was put forward a long time ago Debbie, and things have now moved on.

[Soulgrowth]

It was only 18 months ago Melanie ... but I suppose that is a long time the way things have developed of late.

Debbie

[MelanieGiles]

Yes - most things have changed significantly from September last year with regard to protocols.