What are the implications of an IVA remortgage?
Approaching the end of the IVA term (typically six months before the final payment is due), your creditors may ask you to release your share of any interest in the equity of your property (the value of property less any debt secured against it) if it is reasonable to do so. Typically, any IVA remortgage will need to satisfy the following conditions:
- The amount of debt secured against your property does not exceed 85% of the current market value (this is called the Loan To Value). This means that you will not be expected to obtain a remortgage for more than 85% of the current market rate.
- The monthly repayment cost of the remortgage is affordable for the client (any increase in mortgage payment will be subtracted from your monthly IVA payment and will not exceed 50% of the payment into the IVA).
- The amount of equity you release will not exceed the amount of unsecured debt you owe (excluding statutory interest).
- The IVA remortgage term will not extend beyond the latter of the debtor’s state retirement age or the existing mortgage term.
- The amount of money introduced into the arrangement will be net of the professional or redemption costs (i.e. you won’t have to find this money separately).
- The available equity ([current market value of house * 85% LTV] – outstanding secured debts) at the date of review exceeds £5k (anything below this value is considered de minimis and won’t need to be released).
Your IVA payments will be proportionately reduced to account for any increase in mortgage repayments.
If you have equity in your home but are unable to remortgage then your Supervisor may ask you to continue with your IVA payments for another twelve months. These payments should not exceed the value of the equity you were unable to release. This will all be set out in your proposal before you agree to enter into an IVA.
You can read more about IVAs and whether they are suitable for your situation in our IVA section.
Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including IVAs. If you need to talk to someone about debt, please call the charity’s helpline on 0800 043 40 50 to speak to an adviser.