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I have received conflicting advice regarding the release of equity at the end of an IVA.

One company told me that we would not be required to pay any equity at the end of 5 years because we have recently remortgaged to try to control our debt, but it is not enough. Our house has been valued at 250k and our mortgage is 225k, which is 90% of the value .She said because we have little equity - 25k, and our mortgage is over 80% of the value, we would not have to repay any equity.

The second company said that we would have to release 75% of the equity which is 25k, paying about 18.5k to our creditors, which would be about 97% of the value. But would we be able to get such a high percentage of borrowing and would we earn enough to do so?

Thanks. Joanne

Hi joanne and welcome to the forum

I'll probably just confuse you evern further then, but I think I can give you the right answer.

The majority of creditors these days requre you to have your property revalued during the final year of the arrangement - usually at the 54th month - and then seek additional finance based on 86% of the loan to value. So using your examples, a property worth £250k could raise a mortgage of £212k. If you already owed £225, then there would be nothing to raise, and most creditors now say they do not require any equity if the amount available is less than £5,000.

Do bear in mind that these figures are based upon today's valuations, and that if your property goes up in value coupled with a reduction in your mortgage, that could well throw you into the bracket of raising and paying over equity.

So the first company's solution appears more accurate than the second one - which looks as if it could have been Payplan?

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

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http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp