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

    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:

        Hi
        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
    Steve

      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:

    Hi
    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.

    Syed says:

    I took an IVA in Nov 16 and now my mortgage initial period is nearly over, so I am planning to remortgage and pay off the IVA. I have spoken with the company through which I have taken IVA and they said that I need to pay the full initial amount of my debt, is it true?

      Hi Syed

      If you are looking to settle by releasing equity from your property most IVA companies will require a sum equivalent of the outstanding payments. However some will demand the full amount of the original debt outstanding. I believe Credit Fix are one of these.

      If this is what your IVA company are demanding then there is nothing you can do. You would be better off not making an offer to settle and leaving the equity in your property.

      After your current mortgage deal comes to an end you have 2 options. The first is to simply let your mortgage go onto your lender’s Standard Variable Rate. The second is see if your current lender has better rates such as a tracker or another fixed rate that they will let you move on to.

    Ashley says:

    Hi,

    i’m currently in year 3 of my iva. can i remortgage? i don’t want to release equity as i don’t think there would be enough equity. i just want a lower interest rate if possible. thanks

      Hi Ashley,

      Generally speaking the only option for remortgaging during an IVA is if you want to combine this with releasing equity from your property to settle the Arrangement early. If you are interested in doing this please do give us a call (0800 011 4712). Generally speaking your current lender can’t help with this but there are some lenders who might be able to depending on your circumstances.

      If you are simply looking for a better rate perhaps because you have come to the end of your current fixed rate then speak to your lender. They might allow you to transfer to a tracker rate which is better than their standard variable rate. Some lenders have options like this, other don’t so you never know you might be lucky. If not you are probably going to have to wait it out until the record of the IVA has come off your credit file.

      If a tracker is available to you don’t sign up to anything that ties you in for more than 3 years. This reason for this is that after 3 years your IVA will be completed and the record will have come off your file. Then (given no dramatic changes in the mortgage market) with the right assistance you will be able to remortgage and very possibly get a better rate.

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