Mortgage debt is secured and so not included in an IVA. However an IVA will help you free up cash so you can always pay your mortgage on time and protect your home.
Included in this article:
- How can an IVA help you pay your mortgage?
- What happens to your mortgage debt if you start an IVA?
- Will you have to release equity from your home?
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 can an IVA help you pay your mortgage?
The basic principle of an IVA is that it allows you to reduce the payments you make to all of your unsecured debts such as credit cards, store cards and personal loans. It therefore helps you free up cash so that you always have enough pay your mortgage and any arrears going forward.
The amount you pay into the Arrangement is based on your disposable income – in other words your income less your reasonable living expenses.
The key is that as part of your living expenses you are allowed to include a budget to pay your normal mortgage payment.
You can also include a budget to repay any mortgage arrears you have outstanding. When the arrears are paid, this money can then be diverted back to the Arrangement to increase the amount you pay to your unsecured debts.
What happens to your mortgage debt if you start an IVA?
Your mortgage is secured against your home so it can’ be included in an IVA.
Once you start an IVA it forms a legally binding agreement between you and your creditors. This means that none of them are allowed to take further legal action against you to recover their debt. In addition, any action they are already trying to take is stopped.
One of the legal actions that unsecured creditors can take against your property is to secure their debt with a charging order. If this happens their debt will have to be paid in full from the equity in your property as and when it is sold.
An IVA cannot overcome a charging order if it is already in place. However, it will stop any applications for charging orders which are already with the court and protect your property against any applications in the future.
IVA equity release clause
One of the concerns for home owners when considering an IVA is will you be forced to release equity from their property? The answer to this is you will have to agree to release equity if you are able to do so.
Where you are unable to release equity because you are unable to get a mortgage, your Arrangement will not fail. Instead you will be asked to extend if for an extra year so you pay for 6 rather than the standard 5 years.
Ultimately, if you are at risk of losing your property because you cannot pay the mortgage, starting an IVA can prevent that. As such, agreeing to release some equity if you can afford to do to save your home from repossession is a small price to pay.
Need more advice about whether an IVA could help you? Give us a call (0800 077 6180) or complete the form below and we’ll call you.
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