It may be a good idea to remortgage your property to pay off your IVA early. However there are a number of implications to consider.

Jump to article contents:

• Can you remortgage to pay off an IVA Early?
• How much money will you need to raise
• Can you release sufficient equity from your property?
• What will your new mortgage cost?

Want to pay off your IVA by remortgaging? Give us a call (0800 077 6180) or complete the form below to speak to one of our experts

Can you Remortgage to pay off an IVA Early?

It is possible to remortgage your property and release equity for the purpose of paying your IVA early. Doing this will give you a number of benefits.

You will not have to make further monthly payments into the Arrangement. In addition any future increase in income or windfalls you receive will be yours to keep. It might even be possible to raise a little more than you need to spend in other areas.

However your current mortgage lender is unlikely to be able to help. As such you will need to swap to a different lender as part of the remortgage process.

A specialist mortgage broker will be required to identify appropriate lenders on your behalf.

How much Money will you need to Raise?

The amount of equity you will need to raise to pay off your IVA depends on how long it has left to run. In addition the amount you are paying into the Arrangement each month must be considered.

As a rule of thumb you will need an amount equal to the number of your remaining payments multiplied by the monthly payment amount. You may also have to add an extra 12 months to cover the additional year which would have been added in lieu of equity in your home.

In other words if you have got 3 years of your IVA left to run (including the extra 12 months) and you are paying £200 a month you will need to raise £7200 (£200 x 36).

You must confirm the amount you will need raise with your IVA Company before talking to a mortgage broker.

Can you Release Sufficient Equity from your Property?

If you are considering paying off your IVA with a remortgage you also have to establish how much equity you can release. You need to know if it is going to be possible to raise the amount your need.

The maximum you are able borrow against your property when remortgaging during an IVA is 85% of its market value. As such if your home is worth £250,000 the maximum mortgage you could get is £213,000.

Therefore using the above example if your current mortgage is already £200,000 the maximum extra amount you would be able to release to pay off your IVA would be £13,000.

You may be able to raise up to 95% of the value of your property by taking a secured loan rather than changing your whole mortgage.

You must speak to a specialist mortgage broker to establish exactly how much equity you can release. Give us a call (0800 077 6180) or complete the form below to speak to one of our experts

What will your New Mortgage Cost?

If you want to remortgage your property to pay your IVA early it is unlikely you will be able to use your current mortgage lender. You will normally have to move your mortgage to a specialist lender or consider a secured loan.

These lenders (sometime known as sub prime lenders) do offer mortgages for the purpose of settling an IVA. However the interest you are charged may be higher than your current rate.

As such if you decide to remortgage your monthly mortgage repayment will increase. However the increase will be affordable as it should never be more than the amount you are currently paying into your IVA.

Rather than changing your primary mortgage it may be possible to take a secured loan to pay your IVA. This will protect your mortgage interest rate.