Can an IVA help if mortgage rates go up?

Over the past couple of months a number of mortgage companies including Halifax, Co-OP and Bank of Ireland have confirmed that they will be increasing their mortgage rates for customers on the standard variable rate. This means that thousands of customers will face an increase in their monthly mortgage payment.

If the standard variable rate rises by just 1% this will add £125 a month to the average £150,000 mortgage. If you are already struggling to make ends meet this increase will have a serious impact on your household finances.

We explain how starting an Individual Voluntary Arrangement (IVA) could help if this happens leaving you in a position where you are now struggling with your monthly mortgage payments.

An IVA will free up cash to help pay your mortgage

If you find you are starting to struggle because your mortgage payments are increasing a good way of managing the situation is to pay less towards your unsecured debt payments. If you are already just making the minimum payments a good way to reduce these still further is to start an IVA.

This arrangement will enable you to reduce the payments you make towards your unsecured debts thus freeing up the cash you need to pay your rising mortgage payments

An additional benefit of this type of solution as a home owner is that it will also give legal protection for your property.

Do you want help to start an IVA? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts

How will an IVA protect your home?

If you reduce the payments you make to your unsecured creditors to less than the contracted amounts they will react by starting debt collection and enforcement action against you. This could result in them applying for a County Court Judgement (CCJ) against you.

As you are a home owner if a CCJ is issued against you the creditor can then apply to the court for a Charging Order which if granted would secure their debt against your property.

An IVA gives you legal protection from your creditors if they are included in the agreement and so it prevents them from applying for CCJs or Charging Orders. As such it can be ideal for home owners.

Starting an IVA can prevent your home from repossession

If mortgage interest rates go up, this will increase the amount you have to pay on your mortgage. If you cannot afford to pay this increase, you may consider missing a mortgage payment so you can at least keep up the payments on your credit cards and other unsecured debts. However this is the worst thing you could do.

If they are not paid, your unsecured creditors cannot repossess your property. However the mortgage company can. By starting an IVA you will protect your property from repossession. The agreement frees up the cash you need to pay your mortgage by reducing the amount you pay your unsecured creditors in a controlled and managed way.

BMD Tip: You may be required to release equity from your property during the course of your Arrangement to help repay your unsecured debt. You therefore need to bear this in mind when deciding whether or not it is the right debt solution for you.

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