IVA and Your Home: Will You Lose Your House?
For many people considering an IVA, the biggest fear is losing their home. It is one of the most common questions we hear: if I enter an IVA, will my house be taken from me? The answer is more nuanced than a simple yes or no — and understanding it properly can make the difference between pursuing a debt solution that works for you and avoiding one out of unnecessary fear.
This article explains exactly what happens to your home during an IVA — including the equity release clause, your mortgage obligations, and the circumstances in which your property could genuinely be at risk. It is general information only, not financial or legal advice. For guidance specific to your situation, speak to a regulated debt adviser.
Can You Keep Your Home in an IVA?
In most cases, you can keep your home during an IVA. An IVA is designed to deal with unsecured debts — credit cards, personal loans, overdrafts, payday loans, and similar. Your mortgage is a secured debt and is not included in the IVA. Your mortgage lender is not a creditor in the IVA and your home is not at risk simply because you enter one.
However, there is an important caveat for homeowners: the equity in your property. An IVA does not ignore your home entirely — it looks at the equity (the difference between what your property is worth and what you owe on your mortgage). How that equity is handled is one of the most significant factors homeowners need to understand before agreeing to an IVA.
The Equity Release Clause Explained
Most IVAs for homeowners include what is called an equity release clause, sometimes called an equity release condition. This is a standard term in IVA proposals that affects the final year of your arrangement.
Towards the end of your IVA — typically in year five — your Insolvency Practitioner (IP) will arrange for your property to be valued. If that valuation shows you have equity of more than a specified threshold (often around £5,000, though this varies by arrangement), you will be asked to try to release that equity by remortgaging.
The equity you release goes to your creditors as part of the IVA settlement. This effectively means your creditors benefit from any increase in the value of your property during the IVA period.
What Happens If You Cannot Remortgage?
In practice, remortgaging during an IVA is difficult. Most mainstream mortgage lenders will decline applications from people with an active IVA on their credit file. If you cannot remortgage — which is the common outcome — the IVA typically deals with this in one of two ways:
- Extended payments: Instead of releasing equity, you make additional monthly IVA payments for a further 12 months (making the IVA six years rather than five). This is the most common outcome.
- Capped equity release: Some IVA proposals cap the equity release at a fixed figure, or allow a third party (family member, for example) to pay in a lump sum in lieu of the equity.
The exact terms depend on what is written into your IVA proposal. This is why it is important to read the equity clause carefully before agreeing to the IVA, and to ask your IP to explain it clearly.
What If You Have No Equity?
If your home is in negative equity (you owe more on your mortgage than the property is worth), or if your equity is very low (below the threshold set in the IVA proposal), the equity clause typically does not apply — or results in no payment. In these cases, the IVA runs for five years without any equity release obligation.
If your equity is modest, it may still fall below the threshold once valuation and conveyancing costs are considered. Your IP will factor this in.
Keeping Up with Your Mortgage During an IVA
Your mortgage is not included in the IVA — you must continue to pay it throughout. Your IVA monthly payment is calculated based on your surplus income after all essential living expenses, including your mortgage. So the IVA payment should not prevent you from keeping up with your mortgage, provided it is set correctly.
If you fall behind on your mortgage payments during an IVA, your mortgage lender can still pursue repossession. The IVA does not protect you from secured creditors. Keeping up your mortgage payments is your responsibility and must be treated as a priority throughout the IVA.
Can Your Home Be Repossessed During an IVA?
The IVA itself does not cause repossession. Your home is at risk only if you stop paying your mortgage — and that risk exists regardless of whether you have an IVA. An IVA does not protect you from your mortgage lender.
If you are struggling to pay your mortgage as well as your unsecured debts, it is important to get advice quickly. An IVA may free up income that allows you to sustain your mortgage payments. But if your mortgage situation is already critical, you need specialist advice on both the mortgage and the debt situation together.
What Happens to Your Home If the IVA Fails?
If your IVA fails — for example, because you miss payments and the IP terminates the arrangement — your creditors are no longer bound by the IVA terms. They can resume normal enforcement action. This could include applying for a County Court Judgment (CCJ), attachment of earnings, or in extreme cases, pursuing charging orders against your property.
A charging order converts an unsecured debt into a secured one, using your property as security. If a creditor obtains a charging order, they can apply for an Order for Sale, though courts are generally reluctant to grant these for residential properties, particularly where vulnerable people or children are involved.
Maintaining your IVA payments is therefore important not just for the arrangement to work, but to protect your home from enforcement action by unsecured creditors over the long term. Read our guide on IVA failure rates and what happens when IVAs go wrong for more detail.
Comparing an IVA to Other Options as a Homeowner
For homeowners, the choice of debt solution is particularly important because of the equity implications. Here is a brief comparison:
- IVA: Home is protected; equity clause applies in year five; mortgage must continue. Most common choice for homeowners with significant unsecured debt.
- Bankruptcy: Your home is an asset the Official Receiver must consider. If you have equity, the trustee can apply to sell the property. Bankruptcy is generally a more significant risk to homeownership than an IVA.
- DRO (Debt Relief Order): Only available if your assets — including property equity — are £2,000 or less. If you own a home with meaningful equity, you will not qualify for a DRO.
- Debt Management Plan (DMP): Informal, no equity clause, no insolvency. Debts are not written off but repaid in full at a reduced rate. Can be an option if you want to preserve your credit file impact to a lesser degree.
Getting Advice
If you own a home and are considering an IVA, take time to fully understand the equity clause before you sign anything. Ask your IP what the equity threshold is, how the property will be valued, and what happens if you cannot remortgage at year five.
Free, regulated debt advice is available from StepChange, Citizens Advice, and the National Debtline. These services will explain your options without charging you a fee.
Also see our related guide: IVA and Your Car: Will You Lose It?
This article is for general information only and does not constitute financial or legal advice. If you are struggling with debt, seek guidance from a free, regulated debt advice service.
Frequently Asked Questions
Will an IVA definitely mean I have to release equity from my home?
Not necessarily. An equity release clause is standard in most IVA proposals for homeowners, but whether it results in any actual release depends on the value of your equity at the time of the review. If your equity is below the threshold set in the IVA proposal, or if you cannot remortgage, the arrangement typically converts to an additional 12 months of payments instead.
What if my home has gone up in value during the IVA?
If your property has increased in value during the IVA, this could increase the equity available under the equity release clause. Your IP will arrange a valuation at the relevant point in the IVA. Any equity above the threshold may be required to be paid into the arrangement — either by remortgaging or by extending your payments for a further 12 months.
Can I get an IVA if I am a tenant, not a homeowner?
Yes. Tenants can enter an IVA in the same way as homeowners. The equity clause does not apply if you do not own property. Being a tenant does not affect your eligibility for an IVA. Your landlord is not a creditor in the arrangement (unless you owe rent arrears, which can sometimes be included), and your tenancy is not directly affected by the IVA itself.
What happens to my home if I cannot afford the IVA payments?
If you miss IVA payments and the arrangement fails, your creditors can resume enforcement action. This could include applying for County Court Judgments and, potentially, charging orders against your property. An IVA failure does not automatically lead to repossession, but it removes the protection the IVA provides and leaves your home potentially vulnerable to enforcement by creditors over time.
Is bankruptcy safer for my home than an IVA?
Generally no — bankruptcy poses a greater risk to homeownership than an IVA. In bankruptcy, the Official Receiver or trustee must consider all your assets, including equity in your home. If there is equity, the trustee can apply to sell the property to pay creditors. An IVA is typically the preferred route for homeowners who want to retain their home while dealing with unsecured debts.