Will You Lose Your House If You Get an IVA?#
No. You don’t lose your home in an Individual Voluntary Arrangement. This is one of the main differences between an IVA and bankruptcy - in an IVA, you keep your property.
You’ll continue to pay your mortgage as normal throughout your IVA. In the final year (usually year 5 or 6), you’ll be asked to try to remortgage to release equity. If you can’t remortgage, your IVA payments extend by 12 months instead.
Here’s exactly what happens to your home during an IVA, how the equity release process works, and what happens if you’re renting instead of owning.
IVA vs Bankruptcy - What Happens to Your Home#
The biggest difference between an IVA and bankruptcy is property protection.
In bankruptcy:
- Your home is at risk of being sold to pay creditors
- If you own property with equity, the trustee will force a sale or buy out your share
- You could lose your home and be forced to move
In an IVA:
- You keep your home and continue living there
- Your mortgage payments continue as normal
- In year 5-6, you attempt to remortgage to release equity (if you have any)
- If you can’t remortgage, your payments extend by 12 months instead
This protection is why many homeowners choose an IVA over bankruptcy. You get debt relief without risking your home.
What Happens to Your Mortgage During an IVA?#
Your mortgage continues as normal. You keep paying your monthly mortgage payment throughout your IVA.
Your mortgage is secured debt - it’s secured against your property. If you don’t pay, the lender can repossess your home. Because it’s secured, your mortgage isn’t included in your IVA.
Your IVA only includes unsecured debts like:
- Credit cards
- Personal loans
- Store cards
- Overdrafts
- Catalogues
- Council tax arrears (unsecured)
- Other unsecured debts
Your Insolvency Practitioner calculates your IVA payment based on your disposable income - what’s left after essential costs like mortgage, rent, food, utilities, and travel.
Example:
Monthly income: £2,400 Mortgage payment: £850 Other essential costs: £1,300 Disposable income: £250
Your IVA payment would be around £200-220/month. Your mortgage is protected as an essential cost.
What’s the Equity Release Requirement in an IVA?#
All IVAs include an equity release clause. This means in the final year of your IVA (usually year 5 or 6), you must attempt to remortgage to release equity from your home.
The standard requirement is you attempt to release 85% of your available equity.
How equity is calculated:
Current property value: £250,000 Outstanding mortgage: £180,000 Gross equity: £70,000
85% of £70,000 = £59,500 (this is what you’d attempt to release)
If you can remortgage and release £59,500, that money goes to your creditors and your IVA completes. You’ve met your obligation.
If you can’t remortgage (lenders refuse, you’re too old, income too low, credit score too poor), your IVA payments extend by 12 months instead. You pay for 6 years instead of 5.
Why Do Most People Can’t Remortgage During an IVA?#
Most people in IVAs can’t remortgage because:
- Poor credit score - The IVA is on your credit file, so mortgage lenders refuse you
- Low income - Your income might not support a higher mortgage (you’re already stretching to afford the IVA payment)
- Age - If you’re over 60-65, many lenders won’t offer mortgages that extend into your 70s or 80s
- Employment type - Self-employed or zero-hours contracts make remortgaging harder
- Lender policy - Some mortgage lenders automatically refuse anyone in an active IVA
In practice, 95%+ of people extend their IVA payments by 12 months instead of remortgaging. It’s the expected outcome.
Your IP will still ask you to attempt to remortgage (because the IVA terms require it), but when lenders refuse you, you just extend payments and complete after 6 years instead of 5.
What Happens If You’re in Negative Equity?#
If you’re in negative equity, there’s nothing to release. Your IP can’t force you to remortgage if there’s no equity.
Example:
Property value: £180,000 Mortgage balance: £200,000 Equity: -£20,000 (negative equity)
You have no equity to release, so the equity release clause doesn’t apply. You complete your IVA after 5 years of payments without extending or remortgaging.
Your IP might re-assess your property value at the end of your IVA to check if equity has built up (if house prices rose during your IVA). If you’re still in negative equity, you’re done. If equity appeared, you’d be asked to remortgage then.
Some IPs let family members buy out the IP’s interest in your equity. A relative pays a lump sum (usually around £1,000-2,000) to remove the equity release clause from your IVA. You then complete after 5 years without attempting to remortgage.
Can You Get an IVA If You’re Renting?#
Yes. You don’t need to own property to get an IVA. Most people in IVAs are renters.
Your rent is treated as an essential living expense and included in your budget. Your IVA payment is calculated after rent is deducted.
Example:
Monthly income: £1,800 Rent: £700 Other essential costs: £900 Disposable income: £200
Your IVA payment would be around £150-180/month. Your rent is protected.
Advantages of renting when you have an IVA:
- No equity release requirement in year 5-6
- No risk of property being used to pay creditors
- Simpler IVA - just monthly payments for 5-6 years
Disadvantages:
- Moving house during your IVA is difficult (landlords see the IVA on credit checks and might refuse you)
- Passing credit checks for new tenancies is harder
- You might need a guarantor
Will Your Landlord Find Out About Your IVA?#
Not unless you tell them or try to move.
Your IVA appears on the public Insolvency Register and your credit file, but landlords don’t routinely check existing tenants after you’ve moved in. Your landlord won’t receive a notification about your IVA.
If you’re already renting:
- Your landlord won’t automatically find out
- You can continue renting as normal
- Keep paying rent on time
If you try to move during your IVA:
- New landlords and letting agents run credit checks
- They’ll see your IVA on your credit file and Insolvency Register
- Most will refuse you or require a guarantor
- You might need 6 months rent upfront
Check your tenancy agreement. Some rental contracts include clauses that you must notify the landlord if you enter insolvency. If your agreement has this clause and you don’t tell them, they could use it to evict you. Most standard tenancy agreements don’t include this, but check.
Can You Include Mortgage Arrears in Your IVA?#
No. Mortgage arrears are secured debt and can’t be included in your IVA.
If you’re behind on your mortgage, you need to negotiate a separate repayment plan with your lender. Options include:
- Extending your mortgage term - Spread arrears over the remaining mortgage term
- Capitalising arrears - Add arrears to the mortgage balance (increases total debt)
- Payment holiday - Pause mortgage payments for 3-6 months to catch up (rare, usually only for financial hardship)
- Repayment plan - Pay arrears separately while keeping up current payments
If you don’t deal with mortgage arrears, your lender can start repossession proceedings even if you have an IVA. Your IVA protects you from unsecured creditors (credit cards, loans), but secured creditors (mortgage lenders) can still repossess if you’re in arrears.
Many people use their IVA to free up cash flow to catch up on mortgage arrears. Once unsecured debts are written off or frozen, you have more disposable income to clear arrears.
What If You Own Your Home Outright (No Mortgage)?#
If you own your home outright with no mortgage, you’ll almost certainly need to release equity in year 5-6 or extend payments by 12 months.
Your IP will assess your property value and calculate 85% of the equity. You’ll be expected to attempt to secure a mortgage or secured loan to release that amount.
Example:
Property value: £300,000 No mortgage Equity: £300,000
85% of £300,000 = £255,000
You’d be asked to try to get a mortgage or secured loan for £255,000. If lenders approve you, that money goes to creditors and your IVA completes.
If you can’t get approved (age, income, credit score), your payments extend by 12 months.
Some people can’t stomach the idea of mortgaging a property they own outright. In these cases, bankruptcy might not be suitable. Alternative options include:
- Selling the property and downsizing (use equity to clear debts, keep the rest)
- Debt Management Plan - Doesn’t require equity release, but debts aren’t written off
- Paying debts off over time without a formal arrangement
What If You Jointly Own Property?#
If you own property jointly (with a partner, spouse, or family member), your IP will still assess your share of the equity.
Example:
Property value: £280,000 Mortgage: £150,000 Gross equity: £130,000 Your 50% share: £65,000
85% of £65,000 = £55,250
You’d be asked to attempt to remortgage to release £55,250 in year 5-6.
Your joint owner must agree to the remortgage. If they refuse, your IP can apply to court to force the sale or force your co-owner to buy out your share. This is rare - most IPs just extend payments by 12 months instead.
If you jointly own property with someone who’s not in an IVA (like a partner), their share of equity isn’t affected. Only your share is considered.
Can You Buy a House During an IVA?#
You can, but it’s very difficult.
You can’t get a mortgage while in an active IVA. Your credit score is too poor and the IVA is visible on your credit file. No mainstream or specialist mortgage lender will approve you.
If you want to buy a house during your IVA, you’d need to:
- Buy outright with cash - You’d need to declare the cash to your IP first (if it’s savings, it would be paid into your IVA)
- Get a family member to buy it - They own it legally, you live there and pay them rent
- Wait until your IVA completes - Then apply for a mortgage (you’ll still have the IVA on your credit file for 6 years from the start date, but some specialist lenders might approve you)
What About Second Properties, Holiday Homes, and Buy-to-Let?#
If you own a second property, holiday home, or buy-to-let, your IP will want to release equity from those too.
Options include:
- Selling the property - Sale proceeds (after paying off any mortgage) go into your IVA
- Remortgaging - Release 85% of equity and pay it into your IVA
- Demonstrating rental income - If the property generates rental income, your IP might let you keep it and increase your monthly IVA payment to reflect the extra income
Second properties are less protected than your main home. If you own a holiday home worth £150,000 with £50,000 equity, your IP will likely insist you sell it or release the equity.
Summary: IVAs and Your Property#
- You don’t lose your home in an IVA - Unlike bankruptcy, you keep your property
- Mortgages continue as normal - Your mortgage is secured debt and not included in your IVA
- Equity release in year 5-6 - You attempt to remortgage to release 85% of equity
- If you can’t remortgage, extend by 12 months - Most people extend instead of remortgaging
- Renters can get IVAs - You don’t need to own property, rent is protected as essential cost
- Landlords won’t automatically find out - But credit checks for new tenancies will show your IVA
- Mortgage arrears can’t be included - Negotiate separately with your lender
- Negative equity = no equity release required - If you have no equity, you don’t remortgage
If you’re worried about losing your home and considering bankruptcy versus an IVA, an IVA protects your property while still giving you debt relief. You keep your home and clear your debts over 5-6 years.
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