If you have a mortgage on your property when you decide to enter into your IVA, your creditors will definitely not ignore this fact. They will look at the current market value of your property and the amount you currently owe to your mortgage provider.
Considering these two costs, your creditors will most likely assess if there is any realisable equity in your property. If this happens to be the case, your creditors might ask you to make changes to your IVA proposal in order for it to include you remortgaging your property during the course of your IVA so that you can introduce some or even all of the released equity into your monthly IVA payments.
Even if there is no equity in your property, your creditors might look at the size of your monthly mortgage payments. If they feel that they are excessive and are impacting the amount you can pay in your IVA payments, they might ask you to sell your property and move to rental accommodation, thus, significantly increasing the amount you can pay in your IVA payments.
They’ll propose this as a change in the terms in your IVA, you’ll have to agree to it because otherwise, your IVA will fail. Generally, if your monthly mortgage payments exceed 40% of your total income, most creditors will deem that excessive and will most likely ask you to sell your property.
This may be concerning to read to you right now but you should not worry too much. Don’t forget that your partner may have equitable interest in your property as well. Oftentimes, this is 50%. In other cases, your family may also have rights to your property which would make a forced sale very difficult for creditors. Thus, while many creditors will pressure you to sell your property if you have a mortgage, oftentimes, it can be quite difficult for them due to several reasons such as the ones we’ve mentioned above.
Remortgaging during an IVA is not as difficult as finding an initial mortgage for your property during an IVA. However, you may still have significant difficulty finding a mortgage company that would lend to you considering your situation.
If you are unable to secure a remortgage to your property, your creditors may ask you to make extra monthly payments into your IVA. This is normally seen as increasing the period of your IVA by another 12 months.