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Author: Carl Shave - CEO and co-founder
Last updated: 21 Nov 2024

Mortgages with an IVA

The main difficulty you face when trying to get a mortgage with an IVA is the impact it has on your credit file. This is because lenders will look at every detail of your credit history when assessing your application.

Serious credit events like IVAs will raise red flags during application assessments and can lead to many lenders declining your application, making it difficult for you to find a lender that is willing to offer you a mortgage.

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What is an IVA and how do I get one?

An IVA (Individual Voluntary Arrangement) is a legally binding agreement between you and your creditors, set up by a qualified insolvency practitioner, such as an accountant or solicitor. It must be approved by the court and recorded on the Insolvency Register.

The insolvency practitioner will review your finances, propose a payment plan, and act as a mediator with your creditors. Once approved by your creditors, interest and any charges will be frozen, and creditors can no longer demand additional payments. You’ll then make monthly payments to the practitioner, who will deduct their fee and distribute the remainder to your creditors.

When the IVA period has passed, providing you have kept up with the payments, any debt that was not paid off over the course of the arrangement should be written off. This means you no longer owe those creditors any money. Finally, the record of the IVA will be removed from the Insolvency Register[1].

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Can I get a mortgage after an IVA has been settled?

Although getting a mortgage after an IVA, at a competitive rate, can pose some problems, it is very much possible.

The problems you will encounter when trying to secure an IVA mortgage are caused by the impact the IVA has on your credit rating. All lenders carry out credit checks to help them assess the risks involved in their lending decisions.

Most mainstream and high-street mortgage lenders will decline an application when they see an active IVA on your record. To fill this gap there are specialist lenders available who can help individuals with bad credit secure mortgage products.

However, it is important to note that these lenders may offer higher interest rates and require a larger deposit. This is because they are taking on more risk by offering a mortgage to someone with a bad credit history.

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Can I get a mortgage if I’m still in an IVA?

If your IVA hasn’t yet been settled, it can be very difficult to find a mortgage, but they can still be obtained.

On top of having a bad credit record, whilst you’re in an IVA it’s likely you may struggle to raise the funds for a mortgage deposit. As when setting up the IVA, your insolvency practitioner would want to see all the money you have available to pay off any debts.

Another problem that you will face is the contributions you need to make based on your IVA payment plan. Many lenders may think you could struggle to keep up with your payment plan as well as your mortgage payments, making you seem like a risky borrower and therefore not offering you a mortgage product.

Again, like if you have recently settled your IVA, you will need to focus on applying through specialist lenders. Not all these lenders are available to the public, therefore consulting a mortgage broker is the only way to access them and their unique products.

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How an IVA will impact your mortgage application

The main thing to keep in mind is the time that has passed since your IVA was settled. Essentially, the more time that has passed, the better your chances of success. An IVA that was settled yesterday will carry more weight than one that was settled 4 years ago.

An IVA will be removed from your credit file six years after it is settled[2], therefore this would be the ideal time to apply. However, waiting six years isn’t always feasible for people and you may want to apply sooner. But don’t worry, it’s possible to get a mortgage within a year of your IVA being settled.

You should also keep in mind that if a lender asks if you have ever been in an IVA, you will need to be honest, even if six years have passed.

To kick-start your search for a bad credit mortgage with IVA, please get in touch with our specialist bad credit mortgage brokers today.

This will depend on your personal circumstances and how long it has been since the IVA was settled. As lenders work heavily on risk, the more recent an IVA, the higher the risk you are seen as.

In order to offset this risk, a lender will usually require a larger deposit. This is so they don’t have to lend as much money against the value of your desired property. Therefore, if you were unable to make mortgage payments, not as much of their money would be at risk.

If you have recently settled an IVA you may require a deposit of around 30% of the property’s value. However, if six years have passed and the IVA has been removed from your credit file, you may require the same amount as someone that has never had an IVA, which could be 5% to 10%.

It’s important to keep in mind that there are a varying number of factors a lender will look at and your deposit only plays a part in this. Some other factors include:

  • Your income
  • Your recent credit history
  • The lender
  • Your spending habits – expenses vs income

If you want to get an understanding of the deposit you may need for your best chance of success, reach out today!

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Remortgaging with an IVA

Like getting a mortgage with an IVA, there isn’t a straightforward answer to this question.

The process of getting a remortgage after an IVA can be quite straightforward if you are working with a specialist advisor. It’ll mean you have to be open and honest about your financial history, but also about what has changed since the IVA was set up and the measures you have taken to bring better management to your money. You will also need to have a decent amount of equity already in the property.

Due to the personalised nature of the application, the process of underwriting a mortgage while you have an IVA in place will need to be done manually rather than by automated computerised algorithms. The benefit of this is that a real person will be going over your circumstances and figures before assessing your situation and making the crucial decision.

Being human, the underwriter may take a broader view of your position financially and have a better understanding of the nuances of human behaviour, characters and outcomes, whereas a computer might automatically say ‘no’ upon seeing a negative fact.

One of our experienced (and human!) advisors will be able to take a good look at your individual situation, offer solid advice for how to move forward, recommend deals not found on the high street, and match you with the right lender for your circumstances.

Remember that a properly set-up and administered IVA is designed to be an effective responsibility for handling your debts, but having an IVA on your record will sadly have a negative impact on your application for a mortgage or remortgage.

Remortgaging is often a very good way to raise capital to consolidate your debts as the interest rate on a mortgage is typically more favourable than for a personal or secured loan, but getting a mortgage while an IVA is in place can sometimes be problematic.

However, if you have enough equity in your property and are able to show an improvement in your financial situation – as well as having taken steps to fix as many outstanding issues on your credit record as possible – then your chances will be a lot better.

We work with lenders who understand IVAs and are flexible with your finances. They are especially accommodating if things have changed in more recent years. They could be prepared to offer you a mortgage even while an IVA is still active, or a remortgage to pay off the debt and clear your credit record of the black mark.

Improving your chances when getting a mortgage after an IVA

After you have been in an IVA and want to get a mortgage, it’s essential that you take steps to ensure your application will be presented in the best possible light to lenders.

The first step we would recommend is improving your credit score. Although you will have an IVA on your credit file, in turn reducing you score, you can take steps to improve your more recent borrowing history.

By doing so you will be able to demonstrate to lenders that you can manage borrowed money and pay it back on time.

Another step you can take is providing a larger than average deposit. Deposits are another crucial element of the application process and by providing a larger deposit, lenders will not only see your application as more favourable, but they may also be able to offer improved interest rates.

Using your IVA completion certificate to prove to lenders that you have settled your IVA and are no longer in debt can be crucial too. This document is provided to you by your insolvency practitioner once your IVA has been settled.

One final step you can take is to consult the support of a mortgage broker. This is because many lenders aren’t always easy to access or have strict criteria. Using a broker will not only unlock new mortgage products from specialist lenders, but they will also support you in presenting your application to lenders, ensuring it shows you in the best possible light.

Finding the right mortgage lender if you have an IVA

A growing number of new specialist lenders continue to enter the market with products designed to fill this gap in requirements and help people who may otherwise be left by the wayside when it comes to home ownership.

It would be impossible to list all the specialist lenders who consider applicants with an IVA here – products and deals come onto the market and are taken off all the time, and new lenders may even emerge at the time of writing.

They will typically only deal with applications made through a trusted third party or broker, such as us at Just Mortgage Brokers, with each lender having their own criteria for the nature of the IVA. In general, they are more flexible than most and there has never been a better time for people with poor credit histories to get a mortgage.

To find the best lender for your circumstances and requirements, we’ll go over your personal situation and get a thorough overview of where you currently stand. Contact us now to book a free, no-obligation initial discussion.

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FAQs: How an IVA will affect you

Yes, it’s possible to get a joint mortgage if one applicant has been in an IVA.

However, if you were applying on your own, there may be a limited number of lenders who will accept your application. By using a mortgage broker, you can increase your chances of success as they will have access to specialist bad credit lenders.

When the IVA has been completed, you will be issued with a completion certificate. This is written confirmation that you have made all the necessary payments. It takes about six to eight weeks to come through and the IVA is not officially discharged until it is issued. Keep it in a safe place in case you need it.

The Insolvency Service should remove your details from the register, then inform the UK’s three main credit reference agencies so they can update their records, – TransUnion, Equifax and Experian. It’s a good idea to get copies of your credit report from the agencies a month or so after you receive the completion certificate. This allows you to check that the details have been updated and are correct.

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You must wait six years from the IVA start date for it to disappear from your credit record, but the loan-to-value (LTV) ratio offered, at any stage, will depend on the lender and their criteria.

As a rule, the more recent the IVA, the lower the LTV that will be offered. If there are other adverse credit issues on your report, this will also have an impact.

The issue is the perceived risk of you not repaying the money borrowed. Anyone with a history of adverse credit is deemed to be a high risk, so the interest rate and fees charged are higher and the LTV is lower.

Not all lenders will allow you to borrow money after an IVA. Even when it no longer shows on your credit report, lenders will often routinely ask whether you’ve ever had an IVA. If they ask, you must answer honestly and for some this means they will decline to lend you money.

Some lenders won’t lend to anyone who has had an IVA, no matter how much time has passed since it was completed. Others will consider an application after three years, for example. There are lenders for whom this is less of an issue and who are prepared to lend so long as the IVA has been settled. A specialist mortgage advisor will help you find the right deal for you.

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[1] Gov.uk, Dealing with your debts, Individual Voluntary Arrangements (n.d.) – https://www.gov.uk/options-for-dealing-with-your-debts/individual-voluntary-arrangements

[2] Experian, Clearing your debt with an IVA, How long will an IVA stay on my credit report? (n.d.) – https://www.experian.co.uk/consumer/guides/individual-voluntary-arrangement.html

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Author's Avatar

Carl Shave

CEO and co-founder

About the author

Carl Shave has been involved in the mortgage & finance industry since leaving education and is one of the co-founders of Just Mortgage Brokers. He has written guest posts and provided journalist comments for companies such as The Times, FT Adviser, Mortgage Strategy, Mortgage Solutions and others, demonstrating his extensive industry knowledge.   Qualifications   Certificate in Mortgage Advice and Practice (CEMAP)   Year Attained: 2001   FCA Profile

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