www.iva.co.uk

I have just read the pros and cons of an IVA. What does it mean when it says you may have to remortgage in the last year?

Hi and welcome.

What usually happens is that you will be required to try and get a remortgage in year 4 to release some equity to pay across to your IVA.

Your house will be revalued, and the amount to be paid across will be determined from that.

For myself, if I have less than £5000 equity,the house will be removed from the equation. If you cannot remortgage then your IVA will normally continue for an extra 12 months.

It means you have to attempt to remortgage your home to release any equity thats in it to go into the IVA. It means your mortgage payments will go up but they can only go up by an amount not greater than your IVA payment I think. However abviously you will be paying the mortgage for longer possibly.

Thanks plastic - I had forgotten about the payment. Mine though says that my payment can't be more than 50% of my mortgage payments.

This is a provision which creditors have introduced through custom and practice, and more recently through a set of protocols, to effectively give them an opportunity to share from any equity you have in your property as well as you paying contributions over a five year period.

Creditors will expect you to have your property revalued during the final year of the arrangement, and you will be required to seek additional borrowings based upon a maximum of 85% loan to value. This money is firstly used to pay off any existing borrowings, and then any balance (your share only) is required to be paid to the Supervisor for the benefit of your creditors.

Your new mortgage payments are not to exceed 50% of your current IVA payments, and there is a deminimis limit of £5,000 under which no additional borrowings are required.

Hi Melanie
do all IP's abide by these protocols or are they just a guideline.
Thanks

It is a voluntary code - and I am informed that only about 20% of IPs are actually using them, which is a statistic I find quite suprising - however if your IP does not include the property provision, you can be sure that creditors will modify it in on the day of the meeting.

Ours wasn't on the proposal, but the creditors insisted on it.

what are to odds on borrowing money to fund equity demands by your creditors ?
it must be difficult seeing as credit ratings will basically be in tatters

At the moment many lenders are refusing to lend to people in IVAs, unless the loan to value required is very low - but I suspect that the market will improve over the next few years and hopefully faith will be restored allowing mortgages of up to 85% loan to value again at reasonable interest rates.

Melanie, it is actually 35% and Debt Free Direct and Payplan (whose proposals basically are compliant now) come on board the stats come over 70% will be Protocol compliant. DFD have promised to be Protocol compliant before end of 2008!

I shall look forward to that immensely David!