Remortgage during an IVA

Remortgage during an IVA

It is possible to remortgage during an IVA. However you will normally only be allowed to release equity for the purpose of paying off your Arrangement early.

Included in this article:

Thinking about remortgaging and rather speak to a person? Call 0800 022 4712 or fill in the form below and we’ll call you

Can you remortgage during an IVA?

You may think that it is impossible to remortgage your property and release equity during an IVA. But despite your poor credit rating there are some companies who may lend to you.

That said, you will only be allowed to release equity if it is for the purpose of paying your IVA early. Neither the lender or your Insolvency Practitioner will allow you to take extra money unless it results in the Arrangement being settled.

You will need to speak to your IVA company about how much you will have to pay in order to settle. Normally they will require an amount equivalent to the total of your remaining payments.

The maximum amount you could borrow against your property while you are in an IVA is 85% of its value. If your current mortgage is already larger than this you will not be able to remortgage.

Is it possible to keep any of the equity released?

You can’t remortgage during an IVA and release equity to just spend on anything you want. This is because under these circumstances any cash you release from your property will be treated as a windfall.

The entire amount of any such windfall would have to be paid into the Arrangement over and above your normal payments. As such you won’t be able to release equity for the sold purpose of buying a new car or carry out home improvement. The process must involve paying off your IVA.

That said you might be able to raise more than you need to settle the Arrangement. You could keep this extra cash to spend on other things as long as you agree this with your IVA company first. The mortgage lender would not have any problem with this as long as the Arrangement is being settled as part of the deal.

Do not accept a remortgage offer involving equity release without first agreeing the transaction with your Insolvency Practitioner. If you do, the money released could be treated as a windfall and you may lose it.

Will you have to Remortgage as part of your IVA?

As a home owner you will have to agree to an equity release clause when you start your IVA. This means you have to try and release equity from your property in the 5th year of the Arrangement.

In month 54 you must establish the value of your equity. To do this you will need an up to date valuation and mortgage statement. If based on 85% of the value, your share of any equity is more than £5000 you will have to try and release some of this.

Because you are going to have to do it anyway, if you know you have equity in your property it is worth thinking about a remortgage before month 54. Paying the Arrangement early will mean you get various benefits from early settlement.

Want to discuss remortgaging to pay your IVA early? Give us a call (0800 011 4712) or complete the form below and we will call you.

31 thoughts on “Remortgage during an IVA

    Stacey H says:

    I have an Iva , we have recently had a newborn baby , we have a mortgage our house is tiny and can’t bare to live in it. is there any way that we can get a new house on a Iva plz

      Hi Stacey.

      Unfortunately you can’t simply sell you house during your IVA. Your share of any equity released would be classed as a windfall and would have to be paid into the Arrangement.

      The only option would be to agree with your IVA company that if you do sell, part of the equity released will be used to settle your IVA early. However even if you agree this, you are then going to be left with far less money to offer as a deposit on a new home which will probably restrict your options.

      Even if you do all of this, it will be virtually impossible to get a mortgage to buy a new property on a decent high street rate until the record of the IVA has come off your credit file (6 years from the start date).

      Give the above, if you simply have to move, it is likely that your only vible option will be to rent your place out and move into a larger rented property. You can read more about this option here: Can I sell my house during an IVA

    Shaun O says:

    We are on Benefits. we have a mortgage of aprox £30000. on an Iva which we have debts of around aprox £12000. Is it possable to remortgage on benefits to consolidate that all in to one ?

      Hi Shaun

      Unfortunately I don’t know anyone who would be able to help you re-mortgage if your income is purely made up of benefits and you are currently on an IVA.

      You are likely better off remaining on your IVA and settling your unsecured debt in that way.

    Shaun O says:

    Thankyou for your awnser on this which I proberbly new. But just wanted to explore the chance if there was any.

    Anyhow I have 4 years to run in the iva & 7 years to pay off my mortgage. So in 7 years I will be debt free. Its just times are tough not just for me but everyone with rising fuel costs ect . I’m not really bothered about my credit rating as I’m 55. So in 7 years it be when everything paid. And I don’t really want to borrow anymore money at my age.

    But once again thankyou for your input and advice on this. It helps sometimes just to have a message from you to know where I really stand. So once again thankyou.

    Kind regards & best wishes.

    Scott says:

    My partner and I are coming to the end of our fixed mortgage (Jan 23). We both have 3 years left on our 6 year IVA’s. Mine is £190pm and my partners is £82pm. We recently had our property valued at £240k and have a remaining mortgage of £136k. We also have the 20% help to buy equity loan which we will be due to start paying back in January.

    Is there any way we would be able to pay off our IVA’s with a remortgage, as well as adding our equity loan into the remortgage?

      Hi Scott,

      There are mortgage lenders who might be willing to lend you sufficient funds to both settle your IVA and combine the equity loan into the mortgage. However the options will largely depend on how much you and your partner earn and the amount you will be required to pay to settle your IVA.

      If you would like to have a more detailed chat about this, please give me a call (0800 011 4712).

    Craig C says:

    My wife I are going through a divorce , she has roughly 18 months of an Iva left , she wants to pay me off the mortgage for £50000 , can she remortgage to pay me off , I no longer live in the property

      Hi Craig,

      Your wife can remortgage the property to pay you off. However, she would have to raise sufficient funds to pay off her IVA at the same time. There is no mortgage company that will lend to her if her IVA was to remain in place.

      The first thing she will need to do is confirm with her IVA company how much she will need to raise to settle her IVA as part of her remortgage deal. She can then add this sum to her calculations to work out what might be possible.

      There are only a few mortgage lenders who can potentially help her with this. As such, she will also need to use a specialist mortgage broker to help her.

      If she would like more advice, by all means pass my details on to her. She can call me on 0800 011 4712.

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