Remortgage FAQs

One area of particular concern for homeowners is how their mortgage will be affected if they choose to enter into an IVA.

Understanding the relationship between your IVA and your mortgage is crucial if you're going to be able to make an informed decision.

So, to help you, we've brought together the most frequently asked questions relating to the IVA and mortgage subject.

But if you have any unanswered questions relating to this subject simply call our helpline on 0800 088 7502 where one of our advisers will be pleased to help you.

Mortgage Frequently Asked Questions

Where we felt it was necessary to give a more in depth answer, we will have written a dedicated article. To read any of those articles simply follow the link where you see the highlighted phrase 'Read more'.

Can I include my mortgage in my IVA?

An IVA will can only tackle unsecured debt problems and, unfortunately, mortgages are a type of secured debt. As a result, an IVA will not be able to rid you of your mortgage debt or your obligation to maintain the repayments upon it.

However, if your mortgaged property has been subject of a voluntary repossession where you've handed the keys back to the mortgage lender, or a repossession order, where your mortgage company has forcibly repossessed your property, then things are different.

If the property is sold for less than the outstanding value of the mortgage, then a shortfall is created and the shortfall can be included in an IVA.

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Can I enter an IVA if I have a mortgage?

Yes, your mortgage is a secured loan and, therefore, won't be included in your IVA.

Instead, you will be able to prioritise your mortgage payments, to ensure they are maintained and kept up to date. This can give a great deal of support to those people who are struggling, not only with their unsecured debts, but also with their mortgage too.

The mortgage payments are given priority status within the financial budget during the IVA, which ensures the mortgage is maintained and future arrears avoided. If, for whatever reason, mortgage arrears are incurred during the IVA, then advice should be sought from your IP as they have special authority to help address such situations, whilst ensuring the IVA is kept on track.

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What is a 'Capital and Repayment' mortgage?

This is the name given to a mortgage that is structured in such a way as to allow the borrower to repay a small amount of the capital back each month alongside the interest for the outstanding capital left unpaid.

Each month the amount of money still outstanding reduces, so that when the term of the loan completes the whole original loan has been repaid. Read more

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Can I change to a 'Capital and Repayment' mortgage whilst in an IVA?

If you experience an increase in your income during your IVA you may be tempted to increase payments to your mortgage as a means of off-setting some of the extra income, rather than disclosing it to your IP.

As you know, the basic principle of an IVA revolves around affordability. Your creditors can only expect you to contribute into the IVA what you have left, after your normal living expenses have been deducted from your income.

So, increasing the cost of your mortgage might be seen by some as a legitimate tactic. But it's advisable to first discuss this approach with to your IP before you commit yourself to making changes to your mortgage, as there could be problems when it comes to light at your annual review.

If you are instructed by your mortgage company to switch from an 'Interest Only' mortgage to 'Capital and Repayment' one then, equally, you should notify your IP and ask their advice.

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What mortgages are available for people in an IVA?

There are mortgages available for people in an IVA.

If you are in an IVA and currently renting your home, the opportunity to buy your own property might be something you want to explore. Well, there are specialist IVA mortgage providers still in the market for IVA business.

There are also remortgage products available that can free up equity and enable Full and Final settlement IVAs to take place.

These remortgages provide access to existing equity in order to bring an IVA to an early conclusion, thus shortening the IVAs term.

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Can I change my mortgage when I have an IVA?

There are several reasons why someone might want to change their mortgage whilst in an IVA but, unfortunately, it's extremely unlikely that someone with an IVA will manage to change their mortgage company whilst their IVA is active.

This is due to the difficulty that would be experienced in finding a new lender. Most lenders would reject an application from someone in an active IVA, even if their current mortgage was up to date. Therefore, you're best advised to ensure you are happy with your current mortgage lender before you commit to your IVA.

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Will I be able to get a mortgage after my IVA?

Most IVAs have a fixed term of 5 years after which the IVA terminates leaving you debt free. However, the damage cause to your credit rating lasts for a 6 year period, starting from the date of your original Creditors' Meeting.

Once 6 years has elapsed, the IVA will be removed from your credit file and your credit rating will begin to improve. The removal of the IVA from your credit file should have an immediate affect and you should be able to approach standard high street lenders.

Of course, your application will still be subject to the standard application criteria, where the size of the available mortgage will be determined by your income and the size of your deposit.

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What is a mortgage shortfall?

When a property is sold for a price below the value of the outstanding mortgage a shortfall is created.

This would sometimes happen as a result of a voluntary action, but more often as a result of a repossession, be it voluntary or forceable. The mortgagee remains liable for the outstanding debt, created by the sale of the property and, as such, they must find a method of repaying the debt to the mortgage company.

IVAs are frequently used to tackle liabilities to large mortgage shortfalls, as the size of such debts can be extremely high, making a full repayment almost impossible for the majority of people. Read more

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What is an 'Interest Only' mortgage?

This is the name given to a mortgage which is structured in such a way that only the interest of the borrowed money is paid each month and the capital, i.e. the actual money borrowed, only falls due for repayment at the end of the agreed term.

As a result, the mortgage lender will expect the borrower to have in place a recognised method of repaying the loan, such as an endowment policy or saving fund, to ensure that the necessary funds will be available on the termination date of the loan. Read more

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Can I change to an interest only mortgage whilst in an IVA?

Changing from a 'capital and repayment' mortgage to an 'interest only' product can be a good way of reducing household expenditure as, in general, it costs less to borrow the same amount of money. So, if you're in a fixed budget, with a fixed income and you experience increases to your other living costs, changing your mortgage from 'capital and repayment' to 'interest only' might prove to be the best solution.

But before you do so you should talk to your IP as there may be better ways of helping relieve the financial pressure than making this change.

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