The ‘equity clause’ in IVA

If you own a home and are in an Individual Voluntary Arrangement (IVA), you’ll likely have an equity clause included in your agreement. This clause outlines what happens if you have equity in your property and how it could affect the length of your IVA.

What is equity?

Equity is the difference between the current market value of your property and the amount you still owe on your mortgage and any secured loans.

Example: The market value of your property is £150,000 and your outstanding mortgage is £75,000. You also have a secured loan on the property of £25,000. This means you have a total equity of £50,000.

If you owe more than your home is worth, you may be in negative equity.

Why does equity matter in an IVA?

Equity is considered an asset. If you have £10,000 or more of equity, which is based on 85% loan to property value, in your share of the property, your IVA may be extended by 12 months. This ensures you’re contributing fairly, without putting your home at risk.

Is my home at risk?

No – as of the 2025 IVA Protocol[1], there’s no longer a requirement to attempt a remortgage. If you have equity in your home, and it meets the threshold, you’ll simply be asked to extend your IVA by up to 12 months – not to release equity. This change was made to simplify the process and protect homeowners from the stress and risks of remortgaging, especially when affordability or creditworthiness is an issue during an IVA. If your IVA was approved before July 2025, you may be asked to release equity, which will happen in an equity review.

When will this be looked at?

For IVAs which follow the 2025 IVA Protocol, you’ll be informed whether your IVA is five or six years before it starts.

While IVAs which were approved before July 2025, your equity review typically happens towards the final year of your IVA. Your provider will contact you and guide you through the steps.

What’s the process of finding out how long my IVA will be?

You’ll be asked to provide:

• A recent property valuation (from an estate agent)
• Mortgage redemption statement
• Any secured loan statements
• Endowment statements (if applicable)

Your provider will calculate:

• Your share of the equity
• 85% of the value of the property
• Whether your equity exceeds £10,000

In terms of what happens after that:

• If your equity is less than £10,000, no action is needed, and your IVA will end after five years.
• If your equity is £10,000 or more, you’ll make 12 additional monthly payments into the IVA, instead of releasing equity.

What if I have a joint mortgage?

Only your share of the equity will be considered – not your partner’s.

Still have questions?

We’re here to help. Give us a call on 0800 316 1833, speak to us via WhatsApp or get help online at payplan.com.

[1] The 2025 protocol only applies for IVAs approved after July 2025. Previous IVA protocols apply for IVAs approved before then.