IVA equity release

A person can go for an IVA option but he or she should keep in mind that it affects one’s equity in the property. Equity in property means the current market value of the property minus the outstanding mortgage balance. Before opting for an IVA, it is necessary that the debtor understands the concept of equity.

Equity in property can be positive as well as negative.
Equity is said to be negative when the value of the property is lower than the loan that is borrowed against it. But it is a rare case.
Mostly, property has positive equity which implies that it has a higher value than the loan that is borrowed against it.

A property with a negative equity cannot be included in the IVA but a property with a positive equity can be included.

The creditors are very much interested in analyzing the equity tied to the debtor’s property so that they can get their outstanding dues cleared by releasing the equity in case the debtor becomes bankrupt.

Under an IVA agreement, the debtor will not have to sell his property but the creditors can request for an equity release if it the equity is positive. This request can be made during the IVA or on completion of the full term.

In most of the cases, the creditors request the debtor to release up to 75% of the equity. In case this is not possible then the creditors might also settle for a lower value.

In order to release equity for the IVA, people often remortgage their property.

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