How Does An IVA Affect Your Mortgage?

February 20, 2023

If you have debts that you are struggling to repay, one solution may be to enter into an Individual Voluntary Arrangement (IVA). This is not a decision that is right for everyone, so it’s always best to speak to a debt advisor to discuss your options first.

If you have a mortgage or hope to apply for one in the future, an IVA can have consequences. Here’s a look at the issue in some more detail.

What is an IVA?

An IVA is a legally binding agreement between you and the people you owe money to. It allows you to pay off your debts in monthly instalments over a specified period of time. The amount you pay each month will be based on a realistic assessment of what you can afford after your essential living expenses are accounted for.

The typical length of time for an IVA is five years, during which the interest rate will remain frozen. After the end of the IVA, any outstanding debts are written off. It is important to bear in mind that the arrangement needs to be drawn up by an approved insolvency practitioner, who will receive a fee taken from the payments you make to your creditors.

Further points to bear in mind when considering an IVA is how much money is involved and how it will affect your credit rating. In most cases, the outstanding debts will need to amount to over £15,000 for you to be eligible. It will also impact on your credit rating and be recorded on your credit history for six years.

This means that it will be more difficult for you to borrow money for larger purchases such as a car or to finance a holiday. If you want to take out a loan of over £500 when the IVA is active, you will need to get written permission from your insolvency practitioner.

How does an IVA impact a mortgage?

If you do not currently have a mortgage, it will be difficult to get a deal while your IVA is in place. However, there are specialist lenders who may consider your application. They will take into account other factors such as your current household income, the amount of debt involved, and how well you have been managing your finances since entering into the IVA.

It is a good idea to speak to specialist IVA mortgage advisors, because they will have had plenty of previous experience with similar cases, and will know which lenders are best placed to help you.

If you do have a mortgage, this won’t be included in the IVA and you will need to continue paying it as normal. In some cases, you may be obliged to remortgage near the end of the term to release equity to pay your creditors. In this case, it is best to seek advice from a professional mortgage broker.

Your home may be repossessed if you do not keep up with your mortgage repayments

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