IVA's and increasing mortgages IVA Issue
Summary: IVA's and increasing mortgages - This article seeks to explain the impact of rising mortgage costs on those in an IVA (Individual Voluntary Arrangement).
For some who enter an IVA there is a fixed rate mortgage payment in place and will continue for a number of years. In some ways this is an ideal scenario within an IVA as by definition the mortgage payment won't change allowing a greater sense of security that IVA payments can continue to be affordable.
This is of course where the difficulties can occur. An IVA that can be affordable at the start can run into problems if interest rates increase and subsequently mortgage payments increase too. Increased mortgage repayments obviously affect the disposable income a client will have for the IVA. If the mortgage increases, then if the reduced disposable income still represents a reasonable to return the IVA payment level may be reduced and the IVA continues. For example, if someone were paying £400/mth into an IVA, and their mortgage payment increased by £100/mth, then it should be possible to decrease the IVA payment to £300. The problem comes when someone is only paying £150/mth on an IVA. The resulting mortgage increase placers the IVA at risk as £50/mth is likely to be regarded as too low for an IVA to continue.
Change of mortgage
One way that may help to maintain an IVA following a mortgage repayment increase is to see if the mortgage lender will be prepared to change the terms of the mortgage. This could include moving to an interest only mortgage for a while or extending the term of the mortgage to keep the monthly repayments to an affordable level.