Homeownership and IVAs

If you’re a homeowner, this affects whether an IVA is the right debt solution for you. Here we explain:

An IVA helped us keep our home. We avoided bankruptcy and were able to get back on top of our mortgage repayments.

  • The benefits of an IVA for homeowners.
  • How homeownership impacts IVA qualification.
  • Dealing with equity in your home.

Note: IVAs are also available to non-homeowners.

Benefits Of An IVA For Homeowners

There are two significant benefits of an IVA for homeowners:

  1. An IVA is an alternative to bankruptcy and avoids the possible forced-sale of your home. In an IVA, you remain in control of your home.
  2. Mortgage and other secured repayments are budgeted for before IVA contribution levels are set. This allows you to afford and maintain such repayments, thus avoiding repossession.

I’m a homeowner – Do I qualify for IVA?

It can be difficult to get a mortgage or secured loan to repay unsecured debts with bad credit. Therefore, we can look to see if an IVA is the best solution for all parties.

Your equity in an IVA

By your equity, we mean your share of the total equity in the property.

Usually, for a marital home in UK insolvency law, ownership is an even 50/50 split between the spouses unless explicitly documented otherwise. Who’s name is on the title deeds and who has been making mortgage repayments does not matter.

Equity release in an IVA

Usually, at month 54 of the IVA, there is a requirement to obtain an up to date valuation and attempt to remortgage to release equity to pay into your IVA.

This is subject and limited to:

  • If your share of any equity is less than £5,000, you do not need remortgage as costs and fee make it counterproductive.
  • The maximum equity to be released is based on a limit of 85% loan to value.
  • Your ability to obtain a remortgage.
  • Increase in mortgage payments being no more than 50% of IVA payments.
  • Affordability.

Increased remortgage payments are deducted from IVA contributions until the IVA completes. If this lowers IVA payments to below £50/month the IVA ends at this point.

What If I Can’t Remortgage?

Being in an IVA, it’s harder to get a mortgage, and if you can, it is likely to be on less favourable terms.

If you cannot remortgage, the IVA extends for a maximum of 12 months in an attempt to pay a value equal to the equity in the property. If the property ownership is joint, it is only your share of the equity that creditors can look to unless both owners are in an IVA.

In most cases, this just means extending the IVA by 12 months.

Not being able to release equity as per the terms of the IVA proposal is a common occurrence, happening more often than not.

Please call 0800 014 9675 or a contact us if you have any questions or require some assistance with your debts.