What will happen to my home in an IVA
The answer to this question will depend on whether you are a lodger, renting your home or in the process of buying it through a mortgage.
IVA whilst living as a lodger
As a lodger, the property you are living in will have no interest to your creditors.
Priority will be given to the cost of your lodgings within your financial statement, so as to ensure you will always be able to maintain your rent without the risk of falling into arrears.
Priority will also be given to any other living costs, such as your utility bills.
Your IVA is a private agreement and, as such, your landlord and fellow lodgers will not be made aware of your IVA.
Neither will the credit ratings of your co-habitants be impacted by your IVA as credit reference agencies are no longer allowed to 'black listed' an address.
IVA whilst renting your home
If you are currently renting your home then the IVA will allow you to continue renting as before, so long as the home you are renting is in keeping with your family's needs and doesn't consume a disproportionate amount of your household income.
Priority will be given within your monthly budget to ensure you have sufficient money set aside each month to maintain your rent commitments as well as your council tax and other utility bills.
By prioritising your costs in this way, your IVA actually protects you from falling into rent arrears and significantly reduces the chances of you defaulting on your rent.
Further more, because the IVA is a private agreement, your landlord will not be informed of your IVA, so there should be no impact on your ability to continue renting your home whatsoever.
Because you don't actually own the property, you will not be required to have it valued and the property will form not part of the IVA.
IVA whilst buying your home via a mortgage
It is perfectly acceptable to propose and enter an IVA if you are buying your home rather than renting it.
However, being a homeowner will have a material affect on the terms and conditions of your IVA and also the expectations of your creditors.
An IVA being proposed by a homeowner will include a standard 'Equity Clause' to ensure that all protocol compliant IVAs treat properties with consistency.
If you are a homeowner, so long as you comply with the terms laid out in your IVA, your creditors can not force you to sell your home, even if there is equity within it.
However, your creditors will want an opportunity to benefit from any equity in your home, and they will expect you to try and release it before the IVA finishes.
This gives the creditors one final opportunity to recover as much of the outstanding debt from you as possible before the IVA concludes and the debts are written-off for good.
As said earlier, this demand from creditors has been standardised through the IVA protocol and is now a standard requirement for IVAs proposed by homeowners.
For clarification, your proposal will also outline the circumstances under which you will be obligated to try and release your equity.
- There must be releasable equity of at least £5,000.
- There must be a lender prepared to release the equity.
- The loan to release the equity must be affordable.
Unless all these preconditions are met you will not have to attempt to release any of your equity.
These preconditions will restrict the amount of equity that you will be able to release too.
Because your credit rating will have been damaged by the IVA, there will be very few mortgage companies prepared to offer you a loan, and those that are prepared to lend will restrict your Loan To Value (LTV) ratio, thus limiting the amount you can borrow, and apply higher interest rates, making the loan more expensive.
But none of this should be of concern to you and, so long as you comply with your obligations as laid out in your IVA proposal, the creditors can ask no more.
To discuss your personal circumstances with an IVA consultant, simply call 0800 856 8569 now.
