For viewers new to an IVA, just starting or approaching the 54 month point (homeowners)
Where I mention 9.1 to 9.5 and Annex 6 & 7 - this relates to the IVA Protocol 2014 & 2010 (not many changes between the 2). Annex 6 & 7 are found at the end of the document like attachments.
Annex 6 is the clause mentioned at 9.5 - 9.5 A clause detailing the above as set out in Annex 6 is to be included, where appropriate. (Detailing the above!! - as set out in Annex 6 - it is not worded well and if it detailed the above exactly it would be much clearer and not open to interpretation)
Annex 7 is the example calculations used by the IVA Protocol Document to establish maximum remortgage monies for IVA
If you are a homeowner make sure how your IVA Company calculate equity in your property.
Payplan according to their interpretation of Annex 6 calculate 100% of the value of your property minus your mortgage = your equity & then do 85%. (100,000 - £80,000 = £20,000 equity - 85% = £17,000. They then expect you to release equity or pay another 12 months.
Using the calculations as per the protocol Example 2b at Annex 7 this person would not have to pay anymore - de minimis clause at 9.3.
Sections 9.1 to 9.5 talk about Equity, this is in the main body of the document as below.
Home equity (Net worth)
9.1 Six months prior to the expiry of the IVA (hereinafter referred to as the review date), there should be an attempt to release the debtor’s net worth in the property. The review date would normally be after month 54, unless the IVA has been extended for any reason. However, subject to 9.3 below, where the debtor is unable to obtain a remortgage, the supervisor will have the discretion to consider accepting one of the following alternative proposals:
• a third party sum equivalent to 85% of the value of the debtor’s interest in the property; or
• 12 additional monthly contributions (with the aggregate sum paid to the supervisor being limited to 85% of the value of the debtor’s interest in the property).
9.2 The amount of the net worth to be released will be based upon affordability from income and will leave the debtor with at least 15% of his/her net worth in the property. Remortgage includes other secured lending such as a secured loan. Where it is appropriate to remortgage the property, the specific limits will be:
• Remortgages would be a maximum of 85% Loan To Value (LTV).
• The incremental cost of the remortgage, including cost of any new repayment vehicle, will not exceed 50% of the monthly contribution at the review date.
• The net worth released will not exceed 100p in the £ excluding statutory interest.
• The remortgage term does not extend beyond the later of the debtor’s State retirement age or the existing mortgage term.
• The amount of money introduced into the arrangement will be the mortgage proceeds less the costs of the remortgage, including any costs to redeem any existing mortgage and/or secured loan
Examples illustrating the calculation of available net worth are in Annex 7
9.3 If the amount of the debtor’s net worth net of remortgage costs in the home at the review date is under £5k, it is considered de minimis, and does not have to be released, and there would be no adjustment to the IVA term.
9.4 The monthly payments arising from the remortgage will be deducted from the contribution. If the increased cost of the mortgage means that monthly contributions fall below £50 per month, such monthly contributions are stopped, and the IVA is concluded.
9.5 A clause detailing the above as set out in Annex 6 is to be included, where appropriate, in the individual’s proposal and the summary sheet (Annex 5) will identify that this clause is included.
