IVA and Your Home: Equity, Ownership & What to Expect

Will I Lose My Home in an IVA?

In the vast majority of cases, no - you will not lose your home in an IVA. This is one of the key advantages of an IVA over bankruptcy, where the Official Receiver can force a property sale to repay creditors.

Your mortgage is a secured debt and sits entirely outside the IVA. You simply continue making your normal mortgage payments as part of your essential monthly expenditure. The IVA deals only with unsecured debts - credit cards, personal loans, overdrafts, catalogue accounts, and similar.

The Equity Clause - What Is It?

While you keep your home, most standard IVA proposals include an equity clause. This requires you to attempt to release equity from your property during the final year of the arrangement.

Equity is the difference between your home's current market value and your outstanding mortgage balance. For example, if your home is worth £220,000 and your mortgage balance is £160,000, you have £60,000 of equity.

The Equity Review Process

1. 1In year 5 of your IVA (around month 54), your IP requests a professional valuation of your property
2. 2They also request your current mortgage redemption figure from your lender
3. 3Equity is calculated: property value minus outstanding mortgage
4. 4You are asked to remortgage and release up to 85% of available equity (subject to a minimum threshold, usually £5,000)
5. 5The released funds are paid into your IVA, increasing the return to creditors

What If I Can't Remortgage?

Many IVA holders cannot remortgage during the arrangement because their credit rating is too low, the lender refuses, or remortgaging costs are disproportionate. If this happens:

• Your IVA term is extended by 12 months rather than requiring an equity release
• You make 12 additional monthly payments in lieu of the lump sum
• At the end of the extended term, your IVA completes as normal
• No forced sale of your home occurs under any circumstances

Negative Equity and IVAs

If your home is in negative equity - you owe more than its value - the equity clause effectively does not apply. There is nothing to release. Your IVA proceeds on its normal terms, and the equity review simply confirms no release is required.

What About Mortgage Arrears?

Mortgage arrears are a secured debt and cannot be included in an IVA. If you have mortgage arrears, you will need to address these separately by negotiating directly with your lender. Your IP can advise you on the best approach.

Selling Your Home During an IVA

You can sell your home during an IVA, but you must notify your IP. Any equity released beyond what you need to purchase a new property or cover reasonable rental costs may need to be paid into your IVA. Your IP will advise you on the specific figures.

This information is for general guidance only and does not constitute financial or legal advice. An IVA is a formal insolvency solution - fees apply and your credit rating will be affected. Seek independent professional advice before making any decisions.