Can I get a mortgage with an IVA?

What is an IVA?

An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between an individual and their creditors to pay back debts over a period of time. An IVA involves negotiating with creditors to reach an agreement on the amount that can be repaid. Typically, this involves paying back a portion of the total debt, and the remaining debt is written off.

IVAs are often considered as an alternative to bankruptcy for individuals seeking a structured way to manage their debts while avoiding the more severe consequences of bankruptcy.  However, an IVA will still have a negative impact on the individual’s credit rating, and it remains on the credit file for six years from the date it is approved.

Can I get a mortgage with an IVA?

Obtaining a mortgage while under an Individual Voluntary Arrangement (IVA) can be challenging but not impossible.

An IVA will negatively affect your credit rating and typically remains on your credit report for six years from the date it is approved. This can make lenders wary of offering you a mortgage.

However, different lenders have varying policies regarding applicants with IVAs. Whilst some may refuse to lend, others may consider your application under certain conditions.  There are specialist lenders available who are happy to provide mortgages to individuals with a poor credit history, including those with an IVA, although these lenders may offer less favourable terms, such as higher interest rates.

Traditional high street lenders may also consider applications from individuals with an IVA but their criteria may be stricter.

What factors should I consider when applying for a mortgage with an IVA?

• Time Since IVA Approval: The longer it has been since your IVA was completed or paid off, the better your chances of securing a mortgage. Many lenders prefer applicants who have been discharged from their IVA for at least 12-24 months.
• Credit History Post-IVA: If you’ve managed your finances well since the IVA, such as maintaining timely payments on existing credit accounts, this can improve your chances.
• Income Stability: Demonstrating a stable and sufficient income is crucial. Lenders will want to see that you can afford the mortgage payments alongside any other financial commitments.
• Deposit Size: A larger deposit (typically 15% or more) can make you a more attractive candidate for lenders, as it reduces their risk.
• Check Your Credit Report: Obtain a copy of your credit report to understand your credit standing and ensure there are no errors.

• Consult with a Mortgage Advisor: Working with a mortgage broker or advisor experienced in dealing with cases involving IVAs can help you navigate the options available and identify suitable lenders.
• Demonstrate Financial Responsibility: Show evidence of managing your finances well post-IVA, such as a regular savings habit and timely bill payments.

• Prepare Documentation: Gather all necessary documentation, including proof of income, details of your IVA, and evidence of any savings.
• Apply for a Decision in Principle (DIP): Before applying for a mortgage, you may want to obtain a DIP from a lender. This gives you an indication of how much they may be willing to lend you based on your financial circumstances.

Do I have to declare an IVA when applying for a mortgage?

While it might be tempting to forget about your IVA once it’s off your credit report, being transparent and honest is crucial. Lenders need to know if you’ve had financial difficulties, and failing to disclose an IVA can lead to disappointment when they eventually find out and decline your application. Instead, work with a trusted mortgage adviser to find suitable deals and lenders who will consider your past credit issues. No matter your situation, our friendly team at The Mortgage Masters is here to help.

My bank has refused me a mortgage due to an IVA, can I try and apply elsewhere?

Many high street lenders may refuse to offer you a mortgage following an IVA, even if it happened over three years ago. Therefore, it’s essential to apply to a lender who understands your situation and can overlook past credit issues.

If your mortgage application has been declined, avoid making hasty decisions. Though it can be frustrating and upsetting, a declined mortgage isn’t the end of the world. Our specialist mortgage advisers are here to help you figure out the next steps.

How much deposit do I need with an IVA?

The larger the deposit you can put down, the lower the risk to the lender. However, this doesn’t mean you need to have a huge deposit to get a mortgage, even with an IVA.

The amount required is likely to be determined by a number of factors such as the age of the IVA, your income stability and any other credit incidents.

Can I remortgage with an IVA?

If you have a previous IVA, there may be potential to borrow more against your property or secure a better deal than your initial application.  Naturally, your choices may be more limited compared to someone with perfect credit, but exploring your options could be worthwhile.

Will paying my IVA off early improve my mortgage chances?

Improving your financial situation during your IVA and paying it off sooner could benefit any future mortgage application as settling your IVA ahead of schedule may help in rebuilding your credit rating.

However, the IVA will remain on your credit report for the entire six years from its approval date and continue to affect your mortgage prospects. It is worth noting though that some lenders might be more inclined to consider your application soon after your IVA concludes, especially if your credit history has improved.

Conclusion

While obtaining a mortgage during or shortly after an IVA can be difficult, it is feasible with the right approach and preparation. If you’re considering applying for a mortgage, focusing on improving your financial situation and seeking advice from professionals can significantly enhance your chances of success.

Get in touch with our expert team – we’ll guide you every step of the way.

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