Help for homeowners and tenants considering an IVA
For many people, the biggest worry about debt is their home. IndividualVoluntaryArrangements.net helps homeowners and tenants understand exactly how an IVA would affect where they live before they make any decision. We look at your mortgage or rent, any equity in your property and any secured loans, and explain what would happen at each stage, including the equity review near the end of the IVA.
Many homeowners choose an IVA precisely because it lets them keep their home while making affordable monthly payments. We'll help you see whether that applies to you.
What we'll look at with you
- Your property's rough value and what you owe on it
- Whether you're likely to be asked to release equity
- How any rent or mortgage arrears would be handled
In most IVAs you keep your home and carry on paying your mortgage or rent as normal. If you own a property with equity, you'll usually be asked to try to release some of it towards the end of the IVA.
If you're a homeowner
Your mortgage is a secured debt, so it isn't included in your IVA. Your normal mortgage payments are treated as an essential cost in your budget, and you must keep paying them.
Your proposal will explain how any equity in your home will be dealt with. Equity is the value of your home minus the mortgage and any other loans secured on it.
Equity release in the final year
Under the standard approach used in most consumer IVAs, around six months before the end of your IVA your property is revalued. If there is enough equity, you'll be asked to try to release some of it, usually by remortgaging, and pay it into the IVA. Typically:
- You're only asked to release equity if there is a meaningful amount available.
- You won't usually be asked to release so much that your loan-to-value goes above a set level, commonly around 85%.
- Any increase in your monthly mortgage payment is taken into account in your budget.
- If you can't get a remortgage, you aren't normally forced to sell. Instead, the IVA is usually extended by up to 12 months of extra payments.
Getting a remortgage during an IVA can be difficult, as most mainstream lenders won't lend to people in an IVA. Specialist lenders may, but often at higher rates. Your supervisor will explain the options and you should seek independent mortgage advice.
Selling your home during an IVA
If you want to sell your home during the IVA, you must tell your supervisor. Some or all of the equity may need to go into the IVA, depending on the terms of your proposal.
Mortgage arrears
Mortgage arrears can't be included in an IVA. If you're behind on your mortgage, your budget will need to include an arrangement to clear the arrears, which you should agree with your lender.
If you rent
Renting doesn't stop you from getting an IVA. Your rent is treated as an essential cost in your budget. Rent arrears are a priority debt and need careful handling. In some cases they can be included, but you could still face eviction proceedings, so get advice first.
An IVA doesn't automatically end your tenancy. However, some landlords run credit checks on new tenants, so moving to a new rental during an IVA may take a little more planning.
Joint ownership
If you own your home jointly with someone who isn't in an IVA, only your share of the equity is considered. Your co-owner's share isn't affected, although they may need to agree to any remortgage.
How this compares with bankruptcy
In bankruptcy, your share of your home's equity becomes part of your estate, and the Official Receiver or trustee may sell your home to repay creditors. An IVA gives you much more control, which is why homeowners often prefer it. See IVA vs bankruptcy.
Questions homeowners often ask us
Will I have to sell my house?
Very rarely. An IVA is designed to let you keep your home. If you can't release equity near the end, the usual alternative is to extend the IVA by up to twelve months rather than sell.
Can I switch to a new mortgage deal during my IVA?
Often, yes. Moving to a new rate with your existing lender, known as a product transfer, doesn't usually involve new borrowing. Tell your supervisor, and make sure any change in your payment is reflected in your budget.
What about a Help to Buy equity loan?
A Help to Buy equity loan is secured on your home, so it's treated like a mortgage rather than included in the IVA. It's taken into account when your equity is worked out.
Can I move house during my IVA?
Yes, with your supervisor's agreement. If you sell, some or all of the equity may need to go into the IVA.
Secured loans and second charges
If you have a loan secured on your home in addition to your mortgage, often called a second charge, it can't be included in your IVA. You keep paying it as normal, and the payment goes into your budget. Secured loan arrears are a priority because your home is at risk, so they need to be dealt with before or alongside your IVA. Bring details of any secured borrowing when we speak, and we'll explain how it affects your options.
Getting help as a homeowner
If you own your home, the most useful thing you can do before speaking to us is gather a few figures: a rough value for your property, your latest mortgage statement and details of any other loans secured on it. With those, we can explain how an IVA would treat your home and whether you're likely to be asked to release equity.
If you rent, have your tenancy agreement and details of any rent arrears to hand. Fill in the form at the top of the page, and we'll contact you at a time that suits you.