in an IVA , can we 'voluntarily return' our house

[jsde]

We have been on an IVA for five months that includes a clause whereby we must remortgage after four years and pay any profit to the IVA. Does this mean that we will be unable to sell or 'voluntarily return' our house in the meantime? We are in negative equity and have a secured loan on the property at the moment, and the economic climate does not look too favourable, also we are on an interest only mortgage so we wonder if moving into rented accomodation would be a good idea; however we are not sure if it will be allowed? Thanks for feedback.

[Adam Davies]

Hi
You could move into rented property with your IPs permission but what would you do with the negative equity property ?
You could declare bankruptcy and this would wipe out your unsecured debts,and as long as you could continue with both your mortgage and secured loan then you could keep hold of your house by a third party buying the interest back from the OR for a nominal £1 plus fees.
Your options are to stick with the IVA and I would think that it will be unlikely for you to have to release any equity given the current climate or to consider bankruptcy
Regards

[carlmcmullen]

Good advice as always there from Andy.

But i am intersted to ask why there is a fourth year equity in your proposal, i assume you had negative equity when you entered into the arrangment, so why would your IP put this clause in there.

Does your proposal state that you will attempt to release equity should there be any or does it give an amount you have commited introduce in the final year ?

[Adam Davies]

Hi Carl
I would guess that it's a standard modification put in by creditors at the time of the creditors meeting.
Regards

[MelanieGiles]

I always put this into my clients proposals - negative equity or not - and in fact this has now been confirmed under the new IVA protocol. Just because something is in negative equity now, that does not mean it still will be in five years time - property values may increase, and your secured loan balance and perhaps the mortgage as well will reduce.

Are you currently managing to pay the mortgage and secured loan, as well as all you other household expenditure and the IVA monthly contribution comfortably? If so, I would stay as you are.

[jsde]

Thanks for the advice; we are currently able to make the payments but are considering having another baby and will need more money if I go on maternity leave, also we will need a bigger house. I am just trying to consider our options - whether we would be better off renting a bigger house which would cost us less as we are currently paying a mortgage and extortionate secured loan - and whether our IP would be likely to let us do this. It seems unlikely that much equity could be released in four years anyway. However, are we likely to ever be able to get on the property ladder again if we go into rented accomodation at this point!

[MelanieGiles]

Of course you can get onto the property ladder again - if that is so important to you - you will simply need to save up as much as you can towards a suitable deposit.