Year 5 in an IVA and NO Equity.

[Sinking Fast]

Hi all,

I have a question regarding the final year of an IVA. I am a newcomer to the site, and we are in the early days of proposing an IVA.
My question comes about because I see so many posts stating that their IVA is for 60 months, and due to no equity in their property it is then extended for another 12 months!!

So what happens if come the last year of your 5 year IVA, your property is in negative equity?

Many thanks.

[MelanieGiles]

Then there will be no equity to take into consideration, and the IVA will therefore complete at the end of the fifth year.

The additional year provision is only there to assist people who have equity which could be raised under the 85% LTV scenario, but due to no fault of their own - ie affordability/income ratios/lack of finance available could not raise any funds.

[Sinking Fast]

Thanks Melanie once again.

Then there will be no equity to take into consideration, and the IVA will therefore complete at the end of the fifth year.

The additional year provision is only there to assist people who have equity which could be raised under the 85% LTV scenario, but due to no fault of their own - ie affordability/income ratios/lack of finance available could not raise any funds.

[ComeOnYouSpurs]

Melanie,

This 85% LTV bit..... how would the following example pan out?

House valued at £200,000
Outstanding mortgage of £170,000

Technically £30k equity available (15% of property value).

Would the 85% LTV rule mean that the IVA would conclude after year five even though you have equity available?

And how does the £5,000 "de nimis" rule work, too?

I think that these rules confuse a lot of us.

Regards,

COYS

[MelanieGiles]

Assuming that you have an IVA protocol based IVA, there would be no equity to raise in your example because you are already mortgagedup to 85%.

If the property was worth £205,000 - then 85% LTV would be £174,250 leaving potentially £4,250 available - but under the £5,000 deminimis rule this would be waived.

If the property wsa worth £210,000 - then 85% LTV would be £178,500 leaving potentially £8,500 which would all need to be taken into consideration.

Hope this helps!

[Patrick]

Melanie,

In our last year of our IVA, year 5, with a mortgage of £185,000, a secured loan of £12,000 and the property valued at approximatley £240,000, does the 85% LTV apply, and is re mortgaging possible or even advisable?
Mel
Mel

[Foggy]

Hi. I realise this question is directed at Melanie, but will answer as best I can in the meantime.

With a full market value of £240,000, a forced sale value (85%) would be around £204,000. Taking off the secured loan and outstanding mortgage would leave a sum of £7,000 equity.

As this is close to the deminimis level of £5000, careful consideration must be made to using an accurate valuation and outstanding balances.

Remortgaging at the moment would be nigh on impossible. So, looking at those figures, an extension could well be on the cards.