You could settle your IVA early with a lump sum raised by remortgaging your property.
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- Can you settle an IVA early by remortgaging?
- What amount do you need to raise?
- How much equity could you release?
- Will your mortgage payment change?
Can you settle an IVA early by Remortgaging?
It is possible to settle a monthly payment IVA by paying a lump sum. You could access the funds you need by remortgaging your property to release equity.
Paying off your IVA early offers some significant benefits. You will be free of your debts and will not have to make further payments. In addition any future overtime, bonuses or increases in income your earn will be yours to keep.
Another significant benefit is you get to keep any windfalls you receive after the Arrangement is completed. Things like inheritance, redundancy payment or a lottery win will be yours to keep.
If you are thinking about remortgaging during an IVA speak to us. We can put you in touch with a specialist broker.
What Amount do you Need to Release to Settle an IVA?
The amount you will need to release by remortgaging to settle your IVA is based on the outstanding monthly payments. As a rule of thumb you multiply the number remaining by the monthly payment.
For example if you pay £280/mth and have 25 months left to pay you will need to raise £7000 (£280 x 25). You will need to confirm the exact amount that will be suitable with your IVA company.
Some IVA companies will recognise the benefit to creditors of paying early. They may therefore help you offer slightly less (perhaps a 5-10% reduction).
If your IVA company demands you offer more than the sum of your outstanding payments settling early may not be to your advantage.
How Much Equity could you Release from your Home?
You will normally only be able to remortgage up to 85% of the value of your property. As such the amount of equity you can release will be the difference between 85% of the value and the amount of your current mortgage.
In other words if your property is currently worth £300k then 85% of this is £255k. If your current outstanding mortgage is £240k you could therefore potentially raise a further £15k.
As an alternative to remortgaging you might be able to get a secured loan. The advantage of this option is you could then borrow up to 95% of the value of your property.
In addition to raising the funds you need to settle your IVA it may also be possible to release extra for home improvement or other expenditure.
You will have to speak to a specialist mortgage broker to confirm how much you will be able to release by either remortgaging or with a secured loan. Contact us for more details.
Will your Mortgage Payment Change?
Your mortgage payment will change if after remortgaging to pay off an IVA. The mortgage amount will increase. In addition you will have to change mortgage providers.
The new mortgage company will normally be a so called sub prime lender. These types of lenders charge higher rates of interest than high street lenders. This will also affect the amount of your mortgage payment.
If the amount you need to raise is relatively small compared to your current mortgage it might be more sensible to consider raising the funds with a secured loan. This will mean you protect your primary mortgage rate and payents.
After the record of your IVA has come off your credit file you could consolidate both your mortgage and secured loan onto a better overall rate by remortgaging.