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:
- Can you remortgage during an IVA?
- Is it possible to keep any of the equity released?
- Do you have to remortgage as part of your IVA?
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.