IVA and Mortgages
If you’re a homeowner considering an Individual Voluntary Arrangement (IVA) to manage your debts, you may be wondering how it could affect your mortgage. The good news is that an IVA can still work alongside your mortgage and provide a clear path to becoming debt-free.
In this blog, we’ll explain how an IVA interacts with your mortgage and how it can help you plan for a secure financial future.
How Does an IVA Affect Your Mortgage?
An IVA is a formal agreement between you and your creditors to repay a portion of your debts over a set period, usually five years. For homeowners, mortgage payments are considered when calculating your IVA, but the focus is on making your debt more manageable, not on disrupting your home life.
The key consideration for homeowners is equity in your property. If you have equity (the difference between the value of your home and what you owe on your mortgage), your creditors may request that you try and release some of that equity during the final year of the IVA. However, if this isn’t possible or would cause significant personal issues, the IVA can be extended by one year instead to help meet creditor expectations. This allows you to avoid potential complications with your property.
If your mortgage is in joint names or your partner is unaware of your financial difficulties, it’s possible to exclude the property from the IVA. This helps protect your partner’s financial standing and prevents unnecessary disruption.
Re-mortgaging During an IVA
It’s important to note that re-mortgaging with your current lender during the IVA is possible, and many people do so if they’re eligible. If you’re meeting your mortgage payments and your lender is satisfied with your situation, re-mortgaging with your current lender can help reduce monthly payments or provide more manageable terms without disrupting your IVA agreement.
However, if you’re looking to re-mortgage with a new lender, this might be more challenging during the IVA period, as most lenders will look for a completed IVA before considering you for a re-mortgage.
It’s important to speak with your lender and seek advice from an insolvency practitioner to understand how best to approach re-mortgaging while in the IVA.
The Impact of an IVA on Your Mortgage Lender
While the IVA is in place, your creditors may request information about your mortgage, but your lender cannot force you to sell your home unless you are unable to meet mortgage repayments. If your mortgage is up to date, you can continue to make your regular payments.
Keep in mind that an IVA will remain on your credit file for six years from the start of the IVA. During this time, it can be more difficult to secure new credit or remortgage, but once your IVA is completed, you’ll have a chance to rebuild your credit. The IVA offers a clear end date for your debt repayment, giving you a fresh start and the ability to work toward improving your financial situation.
Planning for Your Future After an IVA
The completion of your IVA marks a new beginning. Any remaining unsecured debt will be written off, and you will have a clean slate. Here’s how you can plan for a better financial future:
- Rebuild Your Credit: Once the IVA is completed, start rebuilding your credit by paying bills on time, avoiding missed payments, and gradually applying for credit when you’re ready.
- Save for the Future: After your IVA, focus on building an emergency savings fund to avoid relying on credit in the future. This provides security and helps you manage unexpected expenses.
- Consider Your Mortgage Options: If you’re looking to re-mortgage, some lenders will be open to working with you after the IVA is completed. You may need to wait until the IVA is off your credit file, but rebuilding your credit history will make this easier.
- Avoid Falling Back Into Debt: To stay debt-free, continue budgeting and living within your means. If you need help with managing your finances in the future, don’t hesitate to reach out for advice.
The Path to Financial Freedom
While an IVA may require some sacrifices, it provides a structured path to debt freedom. At the end of the IVA, you’ll have repaid a significant portion of your debts, and any remaining debt will be written off, leaving you with a fresh start.
If you’re unsure how your mortgage will be impacted by an IVA, or if you’re ready to take the first step toward becoming debt-free, our friendly advisors at Stop My Debts are here to help. We’ll guide you through your options, ensuring you understand how an IVA can work alongside your mortgage and help you plan for a more secure future.
Enquire now to find out how we can assist you in your journey to becoming debt free.