If you’re a homeowner with an Individual Voluntary Arrangement (IVA), it’s crucial to grasp the concept of an IVA remortgage in the final year. As part of your IVA, usually as standard they contain an equity release clause, requiring you to remortgage your house and contribute the equity to your IVA in the final six months. However, if your property’s equity is less than £5,000, remortgaging won’t be necessary.
Yearly IVA Review
Your Insolvency Practitioner (IP) will conduct an annual review of your IVA to ensure its affordability. During this review, you’ll be asked to provide three months of bank statements and payslips. Based on this information, your IVA Supervisor will determine whether your payments should remain the same, increase, or decrease. This process aims to ensure affordability and maximize the benefits for both you and your creditors.
In the last six months of your IVA, particularly the final year, if you’re a homeowner, an equity review and potential remortgage is likely to be required to release equity, as mentioned earlier. The treatment of your property within your IVA proposal and any modifications put forward by your creditors can be found in your proposal document, Chairman’s Report and the Standard Terms and Conditions attached to your proposal. If you need assistance in locating this information, reach out to your Supervisor promptly.
Understanding Redemption Statement
If an equity review is necessary in the last six months of your IVA, your Supervisor will request an up-to-date mortgage and secured loan redemption statement from your lender. This statement provides details about the remaining balance, including interest and charges and any early redemption payment. Your Supervisor will also obtain a valuation of your property. These two things combined help calculate your share of equity, which is based on an 85% loan to value.
Your Supervisor may enlist the assistance of a third party specialist company to help with the equity assessment.
Equity in Your Property
If the equity in your property at month 54 is £5,000 or less, you won’t be required to release any of it into your IVA. In this case, if your IVA was proposed as a 72-month IVA under the IVA Protocol 2021, your payments will continue for the full 72 months. If your IVA was proposed prior to the 2021 IVA Protocol, generally there will be no further action required and your IVA can conclude following your 60th payment, as long as there are no other outstanding obligations.
However, if the calculations reveal over £5,000 equity in your property, you’ll likely be expected to remortgage your home and release the equity into your IVA. The example provided above demonstrates how the IVA equity payment is calculated based on your property value, mortgage, secured loan, and equity percentage.
Declined IVA Remortgage
In the event of a declined remortgage or other secured loan, and if you lack alternative means to meet the payment requirements, you’ll be asked to make an additional 12 monthly payments after fulfilling your regular monthly payments. For a 72-month IVA proposed under the IVA Protocol 2021, your payments will continue for the full 72 months. Once all payments have been made and all terms and conditions met, your IVA will be completed, and any outstanding debt will be written off.
Joint Property Ownership
If you jointly own the property, but the IVA is solely in your name, you’ll only be expected to release your share of the equity. The equity calculation will consider your ownership percentage.
IVA Remortgage Conditions
The debt secured against your property should not exceed 85% of its value. Therefore, your IVA Supervisor won’t request a remortgage exceeding 85% of the market value.
When remortgaging your property as part of the IVA process, it is crucial to ensure that the monthly repayments remain affordable. Additionally, it’s important to note that you won’t be required to remortgage if the term of the new mortgage extends beyond your statutory retirement age.
It’s essential to understand that eligibility for a remortgage will vary depending on the lender. Different lenders may have their own criteria and requirements for granting a remortgage during an IVA.
If you have any questions or concerns regarding an IVA remortgage, don’t hesitate to reach out to us. Our team is here to provide friendly and professional guidance, ensuring that you navigate the process with confidence.
Stay informed and consult your IVA Supervisor for the most accurate and up-to-date information regarding what is required of you in relation to your property.
Remember, our goal at Debt Movement is to assist you throughout your IVA journey and help you achieve financial freedom.
At Debt Movement we provide professional debt guidance and solutions that help you move out of debt. We offer non-judgemental financial guidance to relieve the burden of financial strain and offer support on your journey to financial freedom. Request a free call back today.
