Home Equity, Question by Question
How equity is calculated, and how the rules changed in 2025.
What happens to the equity in my home?
It is counted as an asset, but you keep your home. Your share of the equity is assessed, and under the current rules it determines how long your IVA lasts rather than whether you sell or remortgage. In short, more equity tends to mean a slightly longer IVA, with extra monthly payments, instead of any action against the property itself.
How is my equity worked out?
On a set formula. Your equity is calculated as 85% of your home's market value, minus your outstanding mortgage and any other secured loans, and then only your share is counted. Using 85% rather than the full value builds in a cushion for sale costs and price movement. The cost of any valuation needed is paid for by the IVA, not by you.
Does more equity mean a longer IVA?
Under the 2025 rules, yes. If your share of the equity is under £10,000, your IVA is set up to run for five years. If it is £10,000 or more, it runs for six years, twelve extra monthly payments, which stand in place of releasing any equity. You are told at the start which applies, so there are no surprises late on.
Do I have to remortgage to release equity?
Not in a new IVA. The 2025 rules removed the remortgage requirement entirely, so equity is dealt with through the length of the arrangement instead. If your IVA started before July 2025, an older remortgage clause may apply in the final year, but even then, if you cannot remortgage on reasonable terms, the IVA is extended by 12 months rather than the equity being forced out.
What if I have little or no equity?
Then there is nothing to account for. If your share of the equity is below the threshold, or you are in negative equity, no equity action is needed and your IVA runs the standard five years. Many people's homes have only modest equity once the 85% calculation and the mortgage are taken off, so this is a common and straightforward outcome.
Is my partner's equity affected?
No. If you own jointly with someone who is not in the IVA, only your share of the equity is ever considered. Your partner's share is entirely protected and plays no part in the calculation. For a jointly owned home, this often roughly halves the equity figure that applies to you.
What were the old remortgage rules?
They applied in the final year. For IVAs set up before July 2025, the standard approach was that, around month 54, you tried to remortgage to release up to 85% of your share of the equity, but only on reasonable terms, the extra cost could not exceed 50% of your IVA payment. In practice most people could not remortgage, so their IVA was extended by 12 months instead.
Where does the released equity, or the extra payments, go?
To your creditors. Whether through the older remortgage route or the current extra year of payments, the point is to give your creditors a fair share of your home's value. It increases what they receive, which is part of what makes an IVA acceptable to them. None of it puts your ownership of the home at risk.
Should I get advice?
Yes, particularly if you have meaningful equity. The figures and the rules around equity are where homeowners most often have questions, and getting them right matters. A free, impartial adviser can run the calculation for your situation and explain exactly what it means. Free services like StepChange and MoneyHelper can help, at no cost and with no obligation.
