Hello, I would like help to understand the equity clause.

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by Michael04041973 » Fri Mar 17, 2017 7:15 am
Hello, I would like to understand the equity release clause as I am in year 5 of my IVA. Is it maximum 85% of my property value or 85% of my net worth / equity if above £5k? I owe £208k and value property is £240k so I have £32k equity but this is 86% LTV. I am told that I must pay further 12 months as £32k is above the £5k demis amount. Thank you for your help.
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by Foggy » Fri Mar 17, 2017 8:59 am
Hi Micheal -- how equity is calculated depends upon the exact clause you have as well as your IP's interpretation ( some are conflicting).

Usually it is calculated thus:

Full Market Value = £240,000
x 85% = £204,000
Outstanding secured lending = £208,000
Therefore equity = - 4,000

Aperture ( for one) do it this way:

Full Market Value = £240,000
Outstanding secured lending = £208,000
Equity = £32,000
x 85% = £27,200

Does your paperwork have an example of the proposed calculation method -- either in the body of the proposal or by reference to annexe 6 or 7 of the Protocol ? If it does they have to use that method, which is usually the first example above and the equity clause would not be triggered, being de minimis.
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Michael Peoples
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by Michael Peoples » Mon Mar 20, 2017 8:54 am
Some proposals or modifications state 85% of your 'interest' is to be introduced so if this is the case the IVA would need to be extended. If as Foggy says your IVA is a standard unmodified protocol proposal then the extension may be unwarranted.
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Lisa Thomas
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by Lisa Thomas » Wed Mar 22, 2017 1:16 pm
You need to look at your paperwork and see how the original equity estimate was calculated in the proposals, Estimated Outcome Statement and notes.
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