Why IVAs generally protect the family home
Unlike bankruptcy — where the Official Receiver takes control of your assets including any beneficial interest in property — an IVA is a negotiated arrangement. The IP proposes terms to your creditors, and creditors decide whether the deal is acceptable. Forcing the sale of a family home is rarely proposed and even more rarely accepted.
For homeowners with modest or no equity, the IVA proposal typically leaves the property completely untouched. You continue paying your mortgage (which is secured debt and sits outside the IVA), and once the arrangement completes, the house remains yours.
The equity release requirement in year five or six
Standard IVA protocols include an equity release clause that activates in the fifth year (or sixth year, depending on the protocol version). This requires you to attempt to remortgage your home to release equity into the IVA — with the released funds distributed to creditors as an additional lump sum.
The clause is not open-ended. There are specific tests: your total loan-to-value after remortgage cannot exceed 85%, the released amount cannot exceed 100% of your current IVA balance, the new mortgage payment cannot be more than 50% higher than your existing one, and you must be able to actually obtain the remortgage on reasonable terms.
If you cannot remortgage (because you fail affordability, cannot get a lender at those criteria, or have insufficient equity), the IVA is normally extended by 12 months instead — you make 12 additional monthly contributions rather than releasing equity.
How equity is valued
Equity is calculated as the market value of the property minus the outstanding mortgage balance. If the property is jointly owned (for example with a spouse), only your share of the equity counts — usually 50%.
The valuation is usually done in the final year using a Royal Institution of Chartered Surveyors (RICS) valuation or the lender's remortgage valuation. It is not based on your original purchase price or your own estimate.
For properties in negative equity (worth less than the mortgage), no release is possible and the equity clause is essentially inactive.
What if you sell the house during the IVA?
You can sell your home during an IVA, but you must inform your Supervisor (the IP overseeing the arrangement) and any equity released will normally go into the IVA for creditors.
Selling to move to a smaller property is possible but the mechanics of releasing equity, buying somewhere else, and getting a new mortgage while in an IVA are complex. Most IPs will want to discuss the plan before it happens.
Jointly owned property with a non-IVA spouse
If your spouse is not in the IVA, only your beneficial interest (share of equity) is relevant. Your spouse's share is not part of the IVA and cannot be forced into it.
The remortgage clause still applies to your share — you would need to raise your share of the released amount, which may mean a remortgage against the property as a whole. This requires your spouse's cooperation.