The fear of losing your home is frightening for just about anyone. However when you’re heavily in debt and creditors start making threats about taking your home through bankruptcy and insolvency, or that they’ll tell your landlord that fear becomes magnified. However, fear of losing your home shouldn’t stop you from considering an IVA, because most of these fears are based on rumours. Let’s clear up the facts.
So what is the truth about IVAs and your property, whether you rent or are a homeowner? Here are the answers to a few common asked questions on the matter…
Can I get a mortgage with an IVA?
It does not necessarily matter if you have a mortgage and want to take out an IVA. Your advisor will assess the equity in the house and your ability to remortgage to check if an IVA is suitable for you. In a lot of circumstances when you factor in legal costs, estate agency costs and mortgage exit fees, it makes sense to stay in your current house and pay a lower monthly amount into an IVA rather than selling your house to move to a smaller house. Your advisor will run through this with you and discuss your options.
Will an IVA affect my mortgage?
Mortgages have terms to them which usually range from 2-5 years. Most homeowners will just continue to pay at their current rate when their IVA finishes, rather than remortgage. As your mortgage is a secured debt, it is not affected by your IVA.
Do I have to own a house to get an IVA?
Not at all. Whether you rent, are living with parents or have bought a property you can still take out an IVA.
I’ve heard that because I am a homeowner I’ll have my home taken from me if I do an IVA…
This will not happen. The main attraction of an IVA is to get out of your current debt situation, whilst keeping your house and car. No-one benefits from taking your home from you. Making you homeless disrupts your family, puts strain on your health and relationships, and puts pressure on your local council to re-home you. It is in no-one’s interest to see you lose your home. It is also a very expensive process, so your creditors will avoid this at all costs.
That does not mean however that your home cannot be used to help you pay creditors. If you are a homeowner, you may be asked to release a proportion of any equity within it through re-mortgaging within the five years of your IVA. If you are in negative equity, your IP may wait until the end of the IVA to assess its value to give it a chance to increase.
Will my landlord find out about my Individual Voluntary Arrangement?
Your landlord should not be able to find out you have an IVA unless you tell him, although you should check the clauses of your tenancy agreement to ensure nothing stipulates you are not to enter into an IVA while living at that property. You should be aware however that if you move to another property that requires a credit check during the five years of your IVA you will almost certainly fail a credit check due to your IVA being recorded on there. Most landlords are mainly concerned in receiving rent and do not run additional checks after a tenant has moved in as this attracts more costs.
If I live with my parents will they find out about my IVA?
No. An IVA is usually only for an individual, so only your assets will be considered. IVAs do not have any rights over the property of others, even if they live in the house with you.
I want an IVA, but I am a joint owner on a mortgage. Is this OK?
Your IP will still want your share of the equity in the house to be released, and will need to get their permission to do so. If they won’t give their permission, your IP could go through the courts and force the other owner to comply then value and remortgaged, with their share being paid across to them.
Will I have to sell our holiday home?
Whether or not you are forced to sell your holiday home depends on your creditors and your insolvency practitioner. They may ask you to release some equity from it, or perhaps you can demonstrate an income can be made from letting it during the holiday season, so generating extra income for your creditors.
What if I’m in negative equity?
If you’re in negative equity then there is nothing to be released from the property and nothing to gain from selling it. In this case one of two things can happen. Your IP may choose to assess your property at the end of the IVA when it has increased in value. Alternatively, a friend or family member can buy out the IP’s ‘interest’ in it with a one-off payment.
Can I include my mortgage arrears into my IVA?
IVA’s can only include unsecured debt. A mortgage is a loan that is secured by a property – if you default on a payment and fall into arrears the bank effectively hold a charge over the property and can repossess it. This makes a mortgage and any arrears secured debt, which cannot be included in an IVA.
I am very familiar with The Civil Enforcement Association and the High Court Enforcement Officers Association and I have written extensively on Financial Services matters.
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