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Hi all

I'm looking at entering an IVA shortly and have contacted a couple of different IP's. I've received a couple of bits of conflicting information about the equity release in year 5, and wanted to clarify things. One party is saying that 75% of any equity needs to be released in year 5, regardless of the loan to value ratio of the property. Another party is saying that 75% of the equity needs to be released, but only up to 85% ltv. The latter approach makes more sense to me, as pushing a mortgage beyond 85% will typically require a more specialised product with higher interest rates and will serve to increase debts even more.

Can someone clarify this for me?

Thanks
Steve

Hi steve

The reality is that it is not your IP's decision, but that of your creditors. The usual modification I regularly see states that in the 4th year of the proposal you obtain a professional valuation of the property, and seek two offers of remortgage with regard to equity release. You are then obliged to take out the offer which provides the maximum sum, and can then reduce your payments for the remainder of the IVA term to accomodate the additional mortgage payments.

I suggest that you get which ever IP you decide is going to act in your best interests to address the equity at current values rather than future ones, and if the sum is small, it may be better to offer an additioanl year's payments rather than run the risk of having to raise a higher sum in five years time.

As ever, the creditors wishes will prevail, so do make sure that your IP explains the implication of this with you on the day of the creditors meeting.

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