Remortgaging During an IVA

An IVA can be an option if you owe over £7,000 in unsecured debts and can afford monthly payments of around £100. For homeowners, an IVA offers an advantage over bankruptcy and Debt Management: your home is protected from legal action by your creditors.

Once your IVA is in place, creditors can’t ask the court for a charging order, and they can’t petition for your bankruptcy. Your home could still be at risk if you don’t keep up your payments — and you’ll almost certainly be asked to remortgage or release equity to help repay your debts. Here are the questions we’re asked most.

1. When will I need to remortgage my home?

Usually in the fourth year of your IVA. Most IVAs run for five years, so you’ll be near the end. The timing gives you breathing space, so you aren’t hit too hard by the extra cost.

2. Will I be told about this in advance?

Yes. The insolvency practitioner who sets up your IVA will discuss it before the arrangement begins. If it’s likely to be required, it forms part of the proposal sent to your creditors and is written into the legally binding terms.

3. How much equity will I need to release?

Your creditors will expect you to raise as much as reasonably possible. How much depends on your circumstances, and lenders often cap equity release at around 75–80% of your property’s value.

4. Will I get the same interest rate as my current mortgage?

Not necessarily. The rates available depend on market conditions and may be affected by your credit rating or payment history, so you could end up paying more. There may also be upfront fees, even with the same provider.

5. What if I can’t remortgage or release equity?

It isn’t always possible. Your IVA terms set out in advance what happens then. In most cases the IVA is simply extended by 12 months: your normal payments continue for an extra year.

6. If I can’t remortgage, will the debts still be written off at the end?

Yes — provided you make all your payments on time and keep to the IVA’s other terms. Even if a 12-month extension raises less than a remortgage would have, that won’t count against you: once the IVA ends, the qualifying unsecured debts included in it can still be written off. For more, see an IVA and your credit rating.

7. Can I remortgage earlier than year four?

If your situation allows and your IP agrees, yes. A better-paid job or moving in with a partner can lift your disposable income. If your circumstances change, tell your IP, and read adding new debts to an IVA if anything new has come to light.

Free, independent debt advice is also available from MoneyHelper, StepChange, National Debtline and Citizens Advice.