At the end of an IVA?

mother_hen_2

I'm a little confused - in the final year of an IVA do you have to remortgage your property AND pay an additional year?

Dr_Hook

Usually the IVA will end once the remortgage has completed and the funds paid to your supervisor - you are unlikely to be able to maintain payments after this as your monthly mortgage payment will have increased.

MIVAA

Hi Mother Hen,

I think the confusion stems from people talking about 'payments in lieu of equity'.

You will have to re-mortgage the releasable equity out of your property, as agreed in your IVA proposal, but only so long as...

a) The equity is still there in the property, and hasn't diminished into negative equity.

b) You are able to find a lender prepared to offer you the re-mortgage.

c) You can afford the repayments of the re-mortgage.

d) The re-mortgage is cost effective for the creditors.

Should any of these factors stop you being able to release the equity in your property, then creditors will look for an extension to the IVA's normal 5 year term.

In most cases this extension would be up to 1 year.

So for example, let's say you jointly owned a property worth £120,000, and had a mortgage on that property for say £85,000, and you were paying £300 per month into an IVA.

The chances are you would not be able to raise more than 75% LTV against the property. Therefore you would have a shared releasable equity of £5,000, and by rights only 50% of the equity would be yours, so you would be looking to release £2,500 into your IVA.

In this example it is likely your creditors would want you to provide extra payments into the IVA as a means to get the value of £2,500 from you, rather than asking you to re-mortgage.

If you were to re-mortgage, they would suffer by losing a large part of the £2,500 equity you released as a direct result of re-mortgaging costs you incurred. So as you can see it suits them to take the extra IVA payments in lieu.

As Dr hook says, in the event there is enough equity in the property to enable the re-mortgage to be ecomonically viable, the IVA would normally be completed at that point.

I hope this helps

MIVAA

Dr_Hook

Comprehensive answer! :beer:

mother_hen_2

Wow thankyou for such a clear and descriptive answer -
most grateful for your input...