For many of us, becoming a homeowner is an important milestone in life. A home should be a sanctuary; a place to make memories, somewhere to bring up your family and escape from the stresses of the outside world. However, if you’re struggling with debt, your home can end up at risk, and protecting it can become a challenge.
Fortunately, many debt solutions are designed to minimise the risk of losing your home, whether you own it outright, pay a mortgage, or rent. With that in mind, we’ve created this short guide to help you understand how to protect your home when you’re dealing with debt.
IVAs, trust deeds and your home
One of the main advantages of taking out an individual voluntary arrangement (IVA) or a trust deed is that, if you stick to the terms of your plan, you’ll be able to keep your home. With sequestration or bankruptcy, on the other hand, your house will normally be sold and the money will be used to pay back your debts.
However, even with a trust deed or IVA, you may be asked to release money from your house’s value. This could mean taking a step backwards in the process of paying off your mortgage, but it does allow you to safeguard your home.
If you’re able to release any money from your house (equity), it will be brought into your plan to help pay back more of your debts.
Using your home for debt consolidation
It is possible to use the value of your home to help with your debt, but this can put your home at risk and should be considered carefully.
If you have enough value in your home to clear your unsecured debts, you might choose to release this by remortgaging the property. This can be the right solution for some people, but there’s always the risk of losing your home if you find yourself unable to keep up with the adjusted mortgage payments.
Most debt solutions should not affect your tenancy or ability to rent a property. You also do not need to tell your landlord if you’ve entered a debt arrangement.
Rent arrears cannot usually be included in an IVA or trust deed. However, a debt solution could reduce your monthly debt payments, meaning you can free up more money to cover necessities like rent or catch up with any rent arrears.
Debt can affect homeowners in many ways, so it’s important to seek professional advice before deciding how to tackle your debt.
You can find out more about how debt can affect your home at the following links: