Hi my husband and I are coming to the end of our 1st year in our IVA, the Iva was for £25,000 and we have a mortgage on the property, although we thought we understood the equity release clause in the final year, year 5? Which line of thought are we right in thinking? A. If in the 5th year we have under 15% equity in the property the Iva will complete with no equity release? B. If in the 5th Year we have under 15% equity in the property we will have to complete a 6th year to replace the lack of equity? C. If in the 5th year we have over 15% equity in the property we can choose to release it to the creditors OR we can opt to serve a 6th year and preserve our equity?
At Current our house is worth around 125,000 upper end of the scale, and we owe 114,700 so less than 15% equity but we are wondering say house prices are to rise in the next 5 years where we will stand with regards to the equity release business?
My answer assumes that your IVA is covered by the IVA Protocol and thus the equity release clauses are standard. In which case both A and C are correct.
Always best to check with your own IP, rather than rely on general advice placed on a public forum, however.
The way I understand it is that if C were the scenario, then releasing the equity would be very difficult because of the lack of a any credit rating, so the extra year of payments kick in.
And even if you managed to find a lender - at punitive interest rates - there is a clause in the IVA restricting the amount your repayments can increase.
Just my simplistic take on it so I might be wrong.
At present I feel we belong in scenario a, however I was told by my company that it means there is some equity and I will have to pay something out of it towards my debt!
I think it depends on how your IP reads this in my case!
Not sure how much, if any, house prices will rise in the coming years, but do remember that you will be paying off capital on your mortgage, if you're not on an interest only mortgage.
All those years of watching the value of my property rise, which could release lower rate consolidation loans.... Now I'm hoping the value decreases slightly over the next 4 years, in line with the capital reduction on my mortgage and secured loan.
Mel, if clients have equity in their property year five they can choose to release it or opt for the extension ? I thought they had to release equity if they could unless an extra year equated to the equity that could be released ?
font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by Loads a Debt
Not sure how much, if any, house prices will rise in the coming years, but do remember that you will be paying off capital on your mortgage, if you're not on an interest only mortgage.
All those years of watching the value of my property rise, which could release lower rate consolidation loans.... Now I'm hoping the value decreases slightly over the next 4 years, in line with the capital reduction on my mortgage and secured loan.
Time will tell?
Not in my IVA yet but hope to be soon. However based upon the examples supplied to me and if my IVA started today and I have understood the rules correctly, for me to have just £5000 equity in my property in 5 years time, taking full account of my exisitng negative equity and the reduction in outstanding capital over the next 5 years, would require a house price increase of about 20% over those five years. I'll concern mysef with it nearer the time. After all you can only control what you have control of. No point in worrying unduly about things you have no control over.
Very wise words MikeyM - some many of us could benefit from remembering - me included!!
Regards, Tina Shortland, Debt Advisory Manager for Melanie Giles at Debt Advice TV.
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