Remortgage during an IVA

Remortgage during an IVA

It is possible to remortgage during an IVA to settle the Arrangement early. You may also have to remortgage as part of the terms of the agreement.

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Can you Remortgage during an IVA?

You may think that it is impossible to remortgage during an IVA because of your poor credit rating. However if you have equity in your property there are a growing number of mortgage companies who will lend to you.

The amount of money you can release will depend on a number of things. The key ones are the amount of equity you have and the length of time you have been in the Arrangement.

Depending on how long you have been in your IVA you could remortgage up to 85% of your property’s value. If this has risen since the start of your Agreement the amount of cash you can release could be significant.

Normally you will not be able to remortgage with your current lender during an IVA. You will need a specialist lender who is prepared to work with someone in your situation.

Settle your IVA early by Remortgaging

Given that you can remortgage during an IVA the next question is why would you. One of the main reasons is to settle the Arrangement early. Doing this will bring you a number of benefits.

The first is that it will often mean that you write off even more of your debt. The amount you need to pay as a lump sum will normally be 10%-20% less than what you would pay if you continue making your monthly payments.

In addition you will no longer be tied into your IVA. There will be no more annual reviews. Any additional money you earn or windfalls you receive from the date the agreement is settled will be yours to keep.

Remortgaging during an IVA will often mean moving to a more expensive interest rate. Your mortgage payments will increase as a result. This is an important factor to consider when making your decision.

Can you Remortgage and release equity for other reasons?

You cannot remortgage during an IVA and spend the money you get on anything you want. This is because under normal circumstances any cash you release from your property is considered a windfall.

Under the terms of the agreement the entire amount of any windfall you receive has to be paid into the Arrangement. As such you cannot just decide to release equity and then hope to use the money to buy a new car or carry out home improvement. If you did the money is likely to be treated as a windfall and taken from you.

Given this you must only remortgage with the prior agreement of your Insolvency Practitioner (IP). You must get their agreement beforehand about what you can use the money for. Generally speaking they will only agree if your plan is to use the funds to settle the Arrangement.

If you are planning to settle your IVA early you must not accept a mortgage offer and take the cash without first agreeing the transaction with your IP.

Will you have to Remortgage as part of your IVA?

As a home owner you will normally be required to try and release equity from your property in the 5th year of your IVA. If you have equity of more than 15% you will normally have to remortgage.

Given this if you already know that you have equity of more than 15% it is worth thinking about settling the Arrangement early by remortgaging sooner. Because you would have to remortgage anyway you will benefit from the early settlement.

If you cannot remortgage because there is less than 15% of equity in your property you will be exempt from the requirement. Instead you will be expected to extend your IVA payments for a further 12 months.

Your home may be repossessed if you do not keep up repayments on your Mortgage or other loans secured upon it.

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8 thoughts on “Remortgage during an IVA

    Ann Marie Wright says:

    I have been in a IVA for just over 4 years, I was put in it for 6 years as my house was not part of the arrangement. My debt was not overly excessive to start with, thie last 18mths have been hard. I need some advice on remotgaging, if it would be an option for me and what I would have to pay to the IVA and hownmuch a higher interest remortgage would be

      Hi Ann Marie

      It might well be possible to settle your IVA early by releasing equity from your property. The amount you will need to raise will generally be the total of your remaining payments. As such if you have 24 months (2 years) to go and you pay £200/mth you will need to raise £4800 (24 x £200). Your creditors might accept a small discount for early payment so the offer could be perhaps £4500.

      There are mortgage lenders who would consider lending to you for the purpose of settling your IVA early. This could be in the form of a full remortgage or a secured loan. The total of the overall secured debt you are left with (ie your current mortgage plus the c£4500 you need extra) must not be more than 85% of the value of your property. The rate of interest you will be charged is likely to be higher than your current rate. If you want to find out more about your options please do contact us (0800 011 4712) and we will put you in touch with the appropriate mortgage broker.

        Paul gregson says:

        we are in the 40th month of a 60 month iva.
        We are wanting to know if it is possible to remortgage and release equity to finish the iva. Is this possible to do?
        We owe 115000 on the mortgage with an additional 28000 secured loan, are house is worth 200000 and we pay 850 a month for the iva.
        If it is possible what would be a reasonable offer.

          Hi Paul

          Based on the info you have given it might well be possible to settle your IVA early with a lump sum raised by releasing equity from your property. The amount you will need to offer must be roughly the equivalent of the total you have left to pay into your IVA. Given you are a home owner we must assume that your arrangement will last 72 months (which it would do if you cannot release equity from your property). As such you have 32 months x £850 to pay = £27200.

          When remortgaging during an IVA the rule of thumb is you would only ever be able to go up to 85% of the value of your property (£170k). As such you have c£27k of equity that you could release (£170k less £143k). Therefore in theory you should be able to achieve an early settlement by raising this amount.

          If you want to discuss this in more detail please do not hesitate to contact me on Tel: 0800 011 4712

    Mr Stephen Dixon says:

    I am in a joint iva will be 36mths this March 2018 paying 202 a mth. Current mortgage repayment mortgage with Halifax paying 549.73 current balance 43k house value 78k. I am on dla and my wife works 30 hrs awk for a well known company as a sales assistant.

    Do you think there is a chance of releasing some equity to offer a full and final offer to iva? I have tried to offer a pension drawdown after tax of just over 7300 but said I need to look around the 9to 10k mark before they would offer to creditors.

    Thanks for reading

      Dear Steve

      Given you have been in your IVA for over 2 years already it might well be possible to release £10k of equity from your property to pay for an early settlement of the Arrangement. There are lenders who would consider you for this purpose. However you would need to go through a specialist mortgage broker. Please contact me on (0800 011 4712) and I would be happy to discuss this with you in more detail.

    Em says:

    I paid off my IVA after two years of getting it and I would love to get a mortgage. Is this possible? The house price is 358,000 my earnings have dramtically increased and my partner has ok credit do you think it’s possible?

      Hi Em

      It is possible to get a mortgage after your IVA is finished (and you have your completion certificate). However your options will depend on the date your IVA started. Regardless of when you finish paying the record of your IVA only comes off your credit file 6 years from the start date.

      After the record has come off your file with the help of a specialist mortgage broker you may well be able to get a mortgage from a high street lender. However until the 6 years have past your options will be very limited regardless on how good your income is.

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