www.iva.co.uk

I am at month 51 of a 60 month IVA. In keeping with most IVAs these days I guess, I have the usual equity release clause in my agreement.

First the facts. My IVA is a single IVA although my ex partner has a 50% share on the property. The property has £88k remaining on the mortgage and was puchased for £100k.

Now the legal bit (in Modifications doc):

'After month 54 of the arrangment the Supervisor will obtain a professional valuation of the property. The debtor will then obtain two remortgage quotes from reputable brokers/lenders to satisfy the Supervisor that the equity realisation is the maximum achievable. The property shall be re-mortgaged to a maximum 85% loan to value less existing secured borrowings. A remortgage of less than 85% loan to value is allowable where the lower realisation will introduce funds equating to 100% of the debtors equitable share or where the arrangement will receive payment in full. Where the debtor is unable to obtain a remortgage the IVA should instead be extended by up to 12 months. The amount by which the additional secured borrowings increase shall not exceed 50% of the monthly arrangement contribution at the time the mortgage offer is obtained. Where it is demonstrated that after month 54 the equitable share is less that £5000 (gross) the property is to be excluded from the arrangement without extending the term. The cost of a re-mortgage to release equity shall be deducted from the mortgage proceeds and the monthly payments deducted from the contribution. If the increased cost of the remortgage means the dividend to creditors fall below £50 per month after fees, monthly payments are stopped and the IVA is concluded'.

So now my questions based on the above:

1. How can I avoid the extra year?

2. Does the fact the property is 50/50 affect the remortgage equation?

3. Does this mean that if the valuation shows <£5000 equity in the house it won't be applied (even if I can't get a remortgage)?

Yours hopefully,

Richard

Hi Richard. Welcome to the Forum. Sounds like we had the same modifications. Do you know the market value of your house? If your ex-partner has 50% share in the property, then any equity Would be 50% too, so unless your house has massively increased in value since you bought it, I can't see how you'll reach £5,000 gross value of your share, so you should be okay. I'd say get a local valuer rather than online. The former will provide a more realistic price (usually lower). Ryan - the expert on here has done great things for posters on here, so hopefully he will see this and advise you. Otherwise, use can use the "Ask the Expert" to put your question directly to him. Good luck!! Please let us know how you get on. x

Thanks GilliB.

The value is about £95000 I imagine (though not sure). Really confused with this.

Hi again. If you reckon it's worth. £95K, the loan to value @ 85% based on your figure is £7,671, so you don't even reach that with the difference between the value and outstanding mortgage - and you'd still have to divide it with your ex-partner. From my reckoning equity release and the 12 month extension of your arrangement is off the table, and it should be excluded from the arrangement. I'm sure more knowledgeable posters and/or experts will be along soon to help you. x

GilliB - thanks for the reply. I really hope you're correct, it'd be amazing if this was my final year.

Anyone else have a view?

me too mouldymuffin99! I read through mine again, and it's almost word for word as yours - but mine excludes any 12-month extension. That would only apply if you couldn't get a mortgage, but you wouldn't even need to try for one if you don't reach the minimum £5K they could claim. That's how I read it. Hope someone else picks this up for you. Have you asked your IP about it?

Hi mouldymuffin,

I think the following two statements are key:
"Where the debtor is unable to obtain a remortgage the IVA should instead be extended by up to 12 months"
"Where it is demonstrated that after month 54 the equitable share is less that £5000 (gross) the property is to be excluded from the arrangement without extending the term"

Read together, it would seem an extension to your IVA is based on whether there is equity, and whether your share is at least £5k.

You are right that the fact the property is split 50:50 is taken into account. Based on your property being worth £95k and assuming your mortgage is £88k, your 50% equitable interest is £3,500 and therefore below the £5k. On my reading of that, your IVA would not need to extend.

You should definitely follow it up with your IP and be ready to provide supporting information. Under the modification, your IP is required to arrange the valuation and you should co-operate as fully as possible to allow this.

The fact that you might be turned down for a remortgage based on personal circumstances or available equity at a loan to value (in my experience a maximum of 75% is common at the moment for individuals in IVA) does not appear to be relevant if a valuation shows your 50% of equity is at least £5,000. But again, check this with your IP.

Good luck.

If your property is only worth £95k, and you currently have a mortgage of £88k, the equity release provision does not apply to you. Equity is only calculated if there would be some once the 85% formula is applied. With a mortgage of £88k outstanding, your property would need to be worth around £115k before yoy needed to pay anything additional into the IVA.

Thamks Melanie / all.

Melanie - does that mean, in your opinion, that if the house is worth less than around £115k, then the term of the IVA wont be extended?

this topic is going to apply to me soon.
melanie can you explain in simple terms how to apply the 85% ltv and how we can work out our own equity clause.is it 85% of the current value less what you owe.
mine will be prob house worth 145000 and there will be prob 134000 owing.
i too have the £5000 di minus and am joint owner so only half of any equity will apply.
just so i know how to do it
thanks

Correct - to mouldymuffin69

To back on track - house worth £145k, 85% LTV is therefore £123k. Mortgage is £134k - and higher than 85% LTV figure - therefore nothing to raise.

Does this make sense to both of you now?

Melanie - yes, this is excellent news thank you. x

thankyou for that melanie.
yes that does make sence,as i was working it out wrong.
so as far as the equity release goes i will be £11000 in negative equity or £5500 for my half.

One final question which is highly relevant:

How does the IP determine the value of a house, and is there any room for appeal should the Debtor quesiton the valuation?

The IP doesn't determine the value of the house as far as I am aware - you get a local estate agent in to do the valuation.