Mortgages with an IVA

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Mortgages with an IVA Frequently Asked Questions

Richard Crow answers the most frequently asked questions on Mortgages with an IVA. 

In just 10 minutes, you’ll know a lot more about your mortgage options if you have an IVA.

What is an IVA?

IVA is an abbreviation of Individual Voluntary Arrangement, which is an alternative to bankruptcy. It freezes your debts and allows you to pay them back over a set period of time. It’s a formal and legally binding agreement between an individual and the creditors and is set up by an Insolvency Practitioner. Any money that you still owe after the IVA is complete is written off.

You can apply for an IVA if you can’t afford to pay something, but it’s not necessarily the full amount owed that you’ll need to repay. You will require a regular income and payments will span over a five or sometimes six year period. Whether you’re accepted or not is down to your creditors and your individual situation. In the last year of your IVA, if you’re a homeowner, you may be asked to remortgage to cover any outstanding debts owed. 

Can I get a mortgage with an IVA or after an IVA?

Yes, it is possible. There are specialist lenders that help people that are in or have had an IVA in the past. These lenders will not be offering the cheaper high street rates, but they will lend. 

It’s not a straightforward process and you should not be attempting to apply with a high street lender, as they will almost certainly decline, especially if the IVA is still active or showing on your credit report. Most lenders will be looking towards needing a 25-30% deposit within one to three years of your IVA, which can be difficult for a lot of people.

Will I need to remortgage on an IVA?

Yes, and whether you need to remortgage your property will be written into the terms of your IVA proposal at the very start. This will be sent to you six months from the end of your IVA and they will ask you for an opposite date redemption statement from your mortgage lender and an up-to-date valuation of your property.

Any remortgage will be based on the Loan to Value of the property and they will take away the mortgage balance remaining, leaving what is known as the equity. The IVA provider will then outline any actions that need to be taken. If your share of equity is less than £5,000, it’s likely that no action will be taken, if it’s above £5,000 you will likely be asked to remortgage your home.

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Whether it’s your first time, moving home, investing or just looking for a better rate we would love to hear from you. 

Is an IVA right for me?

It all depends on your situation. Things that you will need to consider are how much your debts are, if you have any spare money to pay towards the IVA, how an IVA will affect your home, if you can afford the fees, and of course, what other things an IVA can affect in your life.

Perhaps future borrowing in the short term. You must have more than two different creditors and owe more than £10,000, if you owe less you can still qualify, but the fees will be higher.

Will I need a specialist mortgage lender because of my IVA?

To get a mortgage after an IVA, yes, you may need to seek help from a specialist lender. Specialist lenders can offer mortgages to borrowers who are in an active IVA or have had a past IVA, although you may be approved to get a mortgage, you may have to pay higher interest rates in addition to a larger deposit.

How long will an IVA stay on my credit file?

It will stay on your credit file for six years, starting from the date that the IVA was approved. It will not be removed if you pay off your IVA earlier than agreed. However, it will be marked as satisfied on your credit report. The separate debts that form the IVA will probably still appear on your record too.

What happens once an IVA has been settled?

Once you’ve completed your IVA, any outstanding debts will be written off and you’ll be debt free. You’ll receive a certificate of completion and it is then advised that you send this on to the three main credit agencies, Experian, Equifax and TransUnion, to get your credit report updated.

The IVA will then show as satisfied on your credit file. It would also be wise to check that you’ve been removed from the insolvency register by visiting the government’s insolvency services website.

How does an IVA affect my mortgage application?

It’s just the same as a normal mortgage application process, however, you need to bear in mind that you’re going to be looking at higher rates, a higher deposit and a smaller pool of lenders to pick from.

Should I wait until my IVA is settled?

Applying for a mortgage after you’ve settled your IVA is going to improve your chances of getting approved. That said, it’s still possible to get a mortgage during your IVA, although it will be a lot harder. It really all depends on how far away you are from completing your IVA and your individual circumstances.

What deposit will I need if I’ve had an IVA or have an IVA?

If you are in an IVA you’re going to need a 20-30% deposit. The further away from the registration of the IVA that you get, so long as you show good financial conduct, the lower the requirement gets.

How can I improve my credit score after an IVA?

After six years your Individual Voluntary Arrangement will be removed from your credit report. Because the IVA restricts what you can borrow, you won’t have much credit information during this period, so your score may still be low. However, there are many steps that you can take to improve your score:

  • Make sure you can prove where you live by being on the electoral roll
  • Build your credit history by utilising small transactions and paying them back on time
  • Set up direct debits to ensure credit cards or store cards are paid on time
  • Keep your credit utilisation as low as you can
  • You can check for errors on your report and any fraudulent activity
  • A good tip is to avoid moving home a lot

How can a mortgage broker like yourself help if somebody has an IVA or has had an IVA?

Mortgage brokers can specialise in finding mortgages for applicants with all kinds of credit issues. We have access to a range of mortgage lenders, including those who accept IVAs. Speaking to us, or any broker, can help you navigate your way through your application.

We can maximise your success as you try to obtain that elusive mortgage offer and at the very worst, we can guide you using a personalised blueprint of what you need to do to achieve your goals in the future. We can also help with budgeting and monitoring your finances.

Your home may be repossessed if you do not keep up with your mortgage repayments. 

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