www.iva.co.uk

If you have an amount of equity in your property, but it would be very expensive rate-wise to release much above say 4 times your salary, can creditors force you to release within the IVA?

In my case, the normal multiples of salary mean I'm about at my limit in terms of what I can borrow on normal rates, but the property is valued higher.

My salary is £33,000. The mortgage is currently at £125,000 so it's already 3.8 times my salary [my wife is not in work]. The property is worth about £200,000, so there potentially is some equity there.

I would willingly look at equity release in 4 years time [say introduce £10,000 into the creditors fund] as my salary should have increased by then, but can creditors 'force' me to take a higher mortgage at higher interest and put me potentially back to where I started with a longer term mortgage with higher payments that I'll struggle to repay over time.

In an IVA or DMP, creditors cannot force you to raise equity in your property, but current IVA protocol states that you must be prepared to raise equity during the final year based upon lending of 85% loan to value - with the repayments being no more than 50% of your current disposable income.

So if you are paying £500 into the IVA by the time you get to the final year, and regardless of the equity you have in your property, your future lending would be based upon a mortgage costing no more than £250 on top of your existing mortgage payment.

Although it is not clear, I interpret this to be based upon an interest only mortgage and not repayment.