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I have a shared ownership property which has some equity. I have been told that in year 4 of a 5yr IVA that I will have to release this equity and make lumps sum payments. Is this true? If so how much of the equity will be taken? For me to do this I would have to sell my home as the housing association will not allow me to remortgage.

Lara

We had a similar situation recently. Thames Valley Housing Association's policy with Shared Ownership leaseholders is to only allow them to borrow up to the value of the original mortgage advance, where the lender is allowed to rely on the provisions of the Mortgagee Protection Clause in the lease. After that any lender would need to take out an indemnity policy to cover themselves in the event of default by the borrower.

In simple terms, what this meant is that no lender was prepared to remortgage the property because of the added risk.

Our client also had a year 4 remortgage clause in her Proposal, which after discussing with creditors they agreed to amend to arranging a secured loan on the property rather than a remortgage.

My only concern with this is the interest rates available on the secured loan may not be overly attractive, as opposed to what you can get with a mortgage.

So, whilst there is a way round it, you have to weigh up the possible costs involved in the long term.

I hope this helps.

Brian Baker

Finebridge Ltd
22 Laud Street, Croydon, CR0 1SU
0800 180 4212
www.finebridge.co.uk

Is it not possible to extend the IVA period to give the equivalent of the equity release ???

Yes it is still possible. Some creditors state that if a re-mortgage cannot be obtained the arrangement may be extended by twelve months in order to allow contributions in lieu of equity.

Brian

Finebridge Ltd
22 Laud Street, Croydon, CR0 1SU
0800 180 4212
www.finebridge.co.uk

Hi Lara

It is not clear from your post whether you are in an IVA yet or not. If you are, I am amazed that these things are being picked up at this stage, rather than at the time your IVA was accepted. As part of usual procedures, an insolvency practitioner ought to obtain an independent property valuation, mortgage redemption statement and H M Land Registry search to identify any difficult title issues, and report accordingly.

If you are not yet in an IVA, then your proposal should reflect the fact that your property is subject to shared ownership, and only 50% is yours. Whilst the revaluation clause is common, it is in no way definite in all proposals, so I suggest you offer a few contribitions during a sixth year to compensate and thus address the equity position.

For your information, there are a few lenders who will now allow you to remortgage your portion of the property, giving you another option.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk