Can I get a mortgage after an IVA?

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Can I get a mortgage after an IVA?

  • IVA Mortgage experts
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  • Free initial advice
  • 5 star review
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Author: Carl Shave - CEO and co-founder
Last updated: May 20th, 2022

Mortgages after an IVA

A induvial voluntary agreement, or IVA is a contract between a lender and a debt which helps you avoid bankruptcy. This usually involves monthly repayments to the creditor until the debt is settled. Bad credit events and competitively priced, low deposit mortgage deals rarely go in hand in hand when you approach the high street lenders. Before the banking crisis and subsequent economic meltdown, the banks and building societies were very relaxed about their lending. This carefree attitude led to an increase in ‘sub-prime’ lending – extending credit to people with a poor credit history, often at inflated rates of interest. This was deemed to be one of the leading causes of the financial crash.

Understandably, the banks and building societies are now a lot more cautious about who they lend to, and how much they will offer. This has made it increasingly difficult to secure a competitively priced mortgage with IVA or any other adverse event on your credit file.

An introduction to Bad Credit Mortgages

What is an IVA?

An IVA – or Individual Voluntary Arrangement – is a formal, legally binding agreement between an individual and their creditors. It must be set up by an insolvency practitioner, who will be a qualified accountant or a solicitor, and approved by the court. It will also be recorded on the Insolvency Register.

It is the job of the insolvency practitioner to assess your finances and help you come up with a reasonable payment plan that you can realistically afford, and that your creditors are likely to accept. The insolvency practitioner will act as an intermediary and deal with your creditors on your behalf for the duration of the IVA – typically five years. They will invariably charge a fee for this service.

Once the proposal has been accepted by your creditors, all interest and charges will be frozen and creditors will be prohibited from demanding additional payments from you. You will make the agreed monthly payment to the insolvency practitioner, who will deduct their fee where applicable then forward the appropriate amount of money to each creditor.

When the period of time the IVA was set up for has passed, and provided 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.

Finding a competitively priced mortgage with an IVA can pose some problems and, realistically, it is likely to cost you more than if your credit history had a clean bill of health. However, there is no reason why someone with an IVA cannot apply for a mortgage, and there are specialist lenders out there who will be able to help secure the most favourable deal 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 mortgage 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. Fortunately, there are some specialist bad credit lenders that are prepared to offer mortgages to people in an IVA, although higher interest rates may apply and the deposit size for IVA borrowers is likely to be bigger.

So, there are lenders out there that will consider your application and, in theory, it is possible to obtain a mortgage agreement with an IVA. Bear in mind, however, that each application will be assessed on a case by case basis on its own individual merits.

How to get a mortgage after an IVA

If you are looking for a mortgage with IVA, we can endeavour to help. Our dedicated bad credit mortgage team works with a network of specialist lenders across the UK, and we know exactly where to turn to find the best deal to meet your particular circumstances. With unlimited access to the market, we offer thousands of mortgage products including exclusive rates that are not available on the high street. We also offer free, no obligation initial advice to help you consider your options.

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

Remember that a properly set-up and administered IVA is designed to be an effective way of taking responsibility and handling your debts. But having an IVA on your record, even though it shows that you are willing and able to manage your finances and make regular repayments on a debt, 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 – the interest rate on a mortgage is typically more favourable than that for a personal or secured loan – but getting a mortgage while an IVA is in place can be sometimes problematic. However, if you have enough equity already 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.

At Just Mortgage Brokers, we deal with many specialist lenders who understand IVAs and who take a more flexible, broader view on your personal finances than a mainstream provider, especially where 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. Talk to us to find out more.

 

The process of getting a remortgage after an IVA can be quite straightforward if you are working with a specialist adviser who has an in-depth knowledge of the market, and the criteria and systems that lenders use to assess mortgage applicants. 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 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 dealt with 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 will be able to take a broader view of your position financially, and have a better understanding of the nuances of human behaviour, characters and outcomes. Where a computer might automatically say ‘no’ upon seeing a negative fact, a real person will understand its context in relation to your current circumstances and may say ‘yes’.

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.

Mainstream banks and lenders tend to shy away from talking to borrowers who have suffered financial problems such as an IVA at any time in their past. However, this has encouraged a growing number of new, specialist lenders to enter the market in the last decade, 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. But they will typically only deal with applications made through a trusted third party or broker (such as us at Just Mortgage Brokers), and each will have their own criteria for the nature of the IVA, registration and satisfaction. In general, they are more flexible than most, and there has never been a better time for people with poor credit histories for whatever reason to get a mortgage.

To discover the best lender to suit your circumstances and requirements, we’ll need to 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.

– Can I still have a mortgage even though I am in an IVA?

Yes, although your options will be limited.

Whenever you apply for credit the lender will carry out a credit check, which means they will see that you are in an active IVA. At this stage many lenders will decline to proceed further.

Luckily there are specialist lenders who won’t be put off by this. However, those that are prepared to make an offer will expect you to put down a sizable deposit – generally a minimum of 30%. They’ll also charge more in terms of interest rate and fees.

If the terms available potentially still makes it a viable consideration for you, a specialist mortgage broker will be able to offer help and advice so that you get the right deal for you.

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– How long does an IVA last?

An IVA typically lasts for five years. When the five years have passed, and provided you have made all the payments as agreed, any remaining unpaid debt can be potentially written off. If this is the situation for your particular case you will no longer owe anything to those creditors.

The IVA will be recorded both on the Insolvency Register and on your credit record. It could be removed from the Insolvency Register when the five years are up, but will remain on your credit record for six years.

 

– What do I need to prove my IVA has been discharged?

When the IVA has been completed, you will be issued with a completion certificate – 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.

In addition, the Insolvency Service should remove your details from the register and inform the UK’s three main credit reference agencies – Callcredit, Equifax and Experian – so they can update their records. 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 to check that the details have been updated and are correct.

 

– Do I have to wait 6 years from when my IVA is discharged to get a higher loan-to-value?

You have to 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 general rule, the more recent the IVA, the lower the LTV that will be offered. If there are other adverse credit issues on your report, then 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, and so the interest rate and fees charged are higher and the LTV is lower.

 

– Will all lenders allow you to borrow money when you have had an IVA?

No, unfortunately not. Even when it no longer shows on your credit report, lenders will often routinely ask whether you’ve ever entered into an IVA. If they ask, you have to answer honestly, and for some this means they will decline to lend you money.

In the case of some lenders, they won’t lend to anyone who has been in an IVA no matter how much time has passed since it was completed. Others will consider an application after, for example, three years. Happily, 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 adviser will help you find the right deal for you.

 

– How do I get an IVA?

Your insolvency practitioner should first explain all options available to you and may apply for an interim order to stop your creditors taking any action against you whilst the IVA is being set up. Following a review of your financial position, your proposal will be put forward to the creditors. If enough agree, then this will be reported to the courts with the IVA then binding to all creditors.

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