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just agreed to apply for IVA. Still confused over fourth year and equity release. Can anyone explain this in laymans terms. Many thanks.

http://www.iva.co.uk/community121/commu ... .asp?id=76
hope that link helps

In the fourth or fifth year of the arrangement you are required to have the property revalued and a redemption statement obtained from your mortgage provider. This determines the level of equity in your property at this time. You are then required to source a remortgage to release the maximum equity available.

There are a number of variations to the same modification but in reality you are not expected to take on a new mortgage that you cannot afford to repay. It is normally expected that you will not have to remortgage to more than 85% of the value of the property and your new mortgage should not increase by anymore than 50% of your previous IVA payments. For example, if your existing mortgage is £800 per month and your IVA payment is £300 per month, the new mortgage will not exceed £950 per month irrespective of the value of the property at the time.

The fourth year modification is not standard across all creditors so ensure that your IP explains what is being asked at the meeting of creditors.

Tanking property prices and low mortgage availability may make equity release difficult even in four or five years time.

If you can't get the equity release the usual solution is to have to do an extra year on the IVA making it six instead of five.

Ask your IP if they use the IVA protocol - in which case you will be required to have a revaluation of your property conducted during the final year, and look to raise equity based on a maximum borrowing of 85% loan to value, subject to the affordability mentioned by Michael above and a diminimis sum of £5,000.

I they have not adopted the protocol, you can expect to have this modified in by creditors in any case. I feel sure that your IP ought to have carefully explained this very important provision with you, so that you fully understand how your home will be effected by the IVA proceedings.

Hi

You may find it easier to get your head around with a couple of examples.

e.g. 1
£
Value of house 150,000
Mortgage and secured loans 130,000
Equity 20,000

85% of value of house 127,500
Less mortgage and secured loans 130,000
Amount required 0

e.g 2
£
Value of house 150,000
Mortgage and secured loans 120,000
Equity 30,000

85% of value of house 127,500
Less mortgage and secured loans 120,000
Amount required 7,500

If the property is jointly owned and your partner is not applying for an IVA then the amount required in example 2 would only be £3,750 half of the £7,500 - however as this sum is less than £5,000 nothing will be required to be paid into the arrangement.

As Michael says above any re-mortgage amount will also depend on your ability to pay the additional mortgage to release the money

so if like me then i have a 78.000 mortgage which is a 95% of the value (at my last statement i owed them just over 76,000) and in 3 yrs time there is very little increase in the overall value of my home due to the present situation we find ourselves in (in fact i would go so far to say that i may be in negative equity at this present moment) i presume then that i just carry on paying my IVA to the end of the 5th year as agreed with my IP?

It depends on what your actual proposals say. If they are protocol compliant then you would just continue to pay until the five years have completed.

My expample was for a protocol compliant IVA only.

This is the main relevant extract from the protocol;

9.1 Six months prior to the expiry of the IVA there should be an attempt to release home equity (this would normally be after month 54, unless the IVA has been extended for any reason). However, where the debtor is unable to obtain a re-mortgage, the IVA should instead be extended by up to 12 months.

9.2 The amount of the equity to be released will be based upon affordability from income and will leave the debtor with at least 15% of their equity in the property. Where it is appropriate to re-mortgage the property through a repayment mortgage (as opposed to interest only), the specific limits will be:

· Re-mortgages would be to a maximum of 85% LTV.
· The incremental cost of the re-mortgage will not exceed 50% of the monthly contribution.
· There will be a cap on the total equity release to not exceed 100% of the remaining outstanding debt.

This does not prevent the IVA Provider proposing a more suitable arrangement where the circumstances warrant it.