MoneyHelperIf you own your home and you're in an IVA, you'll likely have heard about the "equity release" clause that comes into play towards the end of the arrangement — usually in year five. It can sound alarming, but the idea is straightforward: if your home has built up equity, your creditors are entitled to a fair share of it, and this clause sets out how that's handled. Crucially, it does not mean selling your home.
In practice, most homeowners are asked to try to release equity by remortgaging. If that isn't possible, the IVA is usually extended instead. Either way, you keep your house.
The short answer
- The equity clause typically applies in year five of your IVA.
- You may be asked to remortgage to release a share of your home's equity for creditors.
- You'd usually be expected to release up to a set proportion of your available equity.
- If you can't remortgage, the IVA is normally extended by up to 12 months instead.
- You are not required to sell your home to release equity.
What "equity release" means here
Equity is the part of your home's value that you own outright — the difference between what the property is worth and the amount left on your mortgage. The equity release clause in an IVA asks whether some of that value can be unlocked for your creditors near the end of the arrangement. It's a normal feature of homeowner IVAs, and it's spelled out in your original proposal, so you'll have agreed to it at the outset. Our guide for homeowners considering an IVA covers how this fits into the bigger picture.
Why year five?
The timing isn't random. A standard IVA runs for five or six years, and leaving the equity assessment until late means your property has had time to change in value and you've had time to pay down more of your mortgage. It also means the calculation reflects your position near the end of the arrangement rather than years earlier. You can read more about the overall timeline in our guide to how long an IVA lasts.
How the remortgage step works
When year five arrives, your IP will assess your equity. If there's a worthwhile amount, you'll usually be asked to try to remortgage during your IVA to release a portion of it — commonly up to a set share of the equity available, subject to sensible limits so the new borrowing stays affordable.
The conditions that usually apply
- Any remortgage must be affordable within your normal budget.
- You wouldn't normally be expected to take a deal on unreasonable terms.
- There's often a cap, so you're not asked to release more than a fair proportion.
- The money released goes to your creditors through the IVA.
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What if I can't release any equity?
This is the reassuring part. Plenty of homeowners find they can't remortgage — perhaps because an IVA lowers your credit rating and limits the deals on offer, or because further borrowing simply wouldn't be affordable. In that case, the equity clause typically converts into an extension of up to 12 months rather than any risk to your home. Your monthly payments continue for a little longer, and the arrangement then completes as normal.
How the extra payments are worked out
Where an extension applies, the additional payments are based on your existing monthly IVA payment, continuing at an affordable level. This keeps things predictable — you're not suddenly asked to find a large lump sum. If your finances have changed and even the current payment is a stretch, the same flexibility applies as at any other time; see what to do if you can't afford your IVA payments.
How the year-five step connects to your review
Your equity position is looked at alongside your finances, much as it is each year at your annual review. Being organised with paperwork — mortgage statements, a sense of your property's value — helps this stage run smoothly. And if you're comparing your options more broadly, it can be helpful to understand how an IVA treats your home differently from bankruptcy, where property can be more exposed; our guide on whether you'll lose your house in an IVA goes into this.
How IVA Advice Online can help
The equity release step worries a lot of homeowners, but once it's explained clearly it's far less daunting than it first sounds. To talk through your options, get in touch. There's no charge for an initial assessment of your options, and we'll only mention a fee if you choose a solution that carries one.