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.

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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

    Naomi says:

    Hi, myself and my husband have a joint mortgage and am currently going to start a re mortgage for a planned build to our property, does a personal IVA that is only attached to my personal debts affect the remortgage process and my husbands credit score. We have separate bank accounts and the IVA would only be attached to my account but I have my name on the joint mortgage and house bank account?
    Thank you

      Hi Naomi

      From what you have said I understand that you are still in an IVA yourself. Is that correct? If so then you and your husband are unlikely to be able to remortgage your property for home improvement until your IVA is completed. The only way you will be able to get a mortgage before then is if you plan to settle the IVA early with some of the equity you release. In this scenario you might also be able to release extra to cover the home improvement as well as long as you have sufficient equity to do this.

      If you have already completed your IVA then I recommend they you wait until the record has come off your credit file (6 years from the start date). You should then be able to release equity your property on a pretty decent interest rate. However you will still need help from a specialist mortgage broker. Please come back to me if you need assistance with this.

    Kenny says:

    I am in the 3rd year of my IVA and I have a mortgage on my flat, amd I am now being contacted by NatWest as My deal is coming to an end. Am I allowed to switch deals. Do I have to tell them I’m in an Iva and do I have to notify the company my Iva is with that I’m switching deals?

      Hi Kenny

      First of all you MUST make clear to NatWest that you are now in an IVA. This may affect their ability to offer you a new deal. If they can’t offer you a deal then you can simply move to their standard variable rate (SVR).

      If they are still prepared to offer you a deal, before going ahead you will need to confirm you can do it with your IVA company. Technically you would be taking credit and you should not do this without first getting agreement from them in writing. Just moving to the bank’s SVR is not taking new credit as the original mortgage agreement still stands.

      Whichever route you eventually take, you need to discuss the impact of any change in your mortgage payment with your IVA company. If your payment goes down you will have more surplus income and your IVA payment might have to go up. If your mortgage payment rises you might have to discuss whether you can reduce your IVA payments to compensate…..

    Paul says:

    Hi,
    I am two and a half years into my IVA. I have an Interest only mortgage which finishes in 20 months time the outstanding balance on this is approx £100K. I also have a second mortgage on the property with another provider which has 17 years to run the balance on this is £85K. my house value is approx £350K. Is it possible to get a new mortgage to combine the two current mortgages and clear the IVA?

    Just to muddy the waters further my wife is also in a DMP. are we destined to lose our home? or is there still a bit of hope?

      Hi Paul

      In theory it is possible to remortgage your property during your IVA to combine both the original and second mortgage and raise a lump sum to pay off the IVA. In reality whether or not this can be done will depend on the amount of equity in the property, your gross incomes and the amount the IVA company agrees you will need to raise to settle the Arrangement.

      Given there looks to be a good amount of equity in your property, in your case to process may well be possible. Please do contact me and I would be happy to discuss the options with you (0800 011 4712).

    Kelly W says:

    Hi, I am about to take on a IVA. I have just signed a new mortgage deal for 5 years. At the end of this 5 years could I just stay with the same provider and continue a mortgage with them???

      Hi Kelly

      If you get to the end of your current mortgage deal during your IVA, you don’t need to worry. You will simply be able to transfer onto their standard variable rate (SVR). It is unlikely that you will be able to get another “deal” with the same lender until your IVA is completed and comes off your credit file (6 years from the start date).

      Remember, if you enter into an IVA, you are likely to have to sign up to an “equity release clause”. This means you will have to try and remortgage in year 5 to release equity for the benefit of your creditors. Where this is not possible, your IVA payments will be extended for a further 12 months.

    Satha says:

    I was on an IVA but then came into some money. I paid off the IVA and bought a house without the need to get a mortgage. Can I now get a mortgage against my property to get my equity out?

      Hi Satha

      The fact that you are no longer in an IVA does not automatically mean you can now get a mortgage. Currently there are no high street lenders who will offer a mortgage to you until the record of your IVA has come off your credit file. This will be 6 years from the start date of the Arrangement. So to get the best interest rate possible you will have to wait until that time.

      If it is more than 3 years until the record comes off your file, it might be possible to get a mortgage sooner with a sub prime lender. However, these mortgage are only currently available 3 years from the date your IVA was paid off and you got your completion certificate.

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