Can You Get a Mortgage With an IVA?

Buying a home is a dream for many but, for those with high amounts of debt and poor credit ratings, getting a mortgage may feel impossible. An IVA may be an ideal option that helps you get on top of your debts to start making that dream a reality. Learn more about whether an IVA is right for you and the considerations to take into account when weighing up whether you can get a mortgage with an IVA.

An IVA stands for Individual Voluntary Arrangement. This is a formal and legally binding agreement between you and your creditors to repay an affordable amount to your debts. This means that once approved by your creditors, both you and your creditors have to stick to it.

IVAs are popular because they freeze interest and charges, meaning you pay just one affordable monthly repayment and can write off a significant amount of unsecured debt.

Can you get a mortgage with an IVA?

Having an IVA doesn’t necessarily mean you won’t be able to get a mortgage, but it may affect your mortgage application process and reduce your chances. Any credit over £500 that you’d like to obtain while you’re in an IVA needs prior written approval from your insolvency practitioner and, in some circumstances, your creditors. As the whole point of an IVA is to help you get back on top of your finances, taking out a mortgage may put the IVA in unnecessary risk.

An IVA can help you to get into better financial shape so that you can apply for a mortgage in the future. Getting a mortgage when your financial circumstances have improved may also result in you getting better rates and deals, reducing your monthly mortgage repayments.

To decide whether you would benefit from an IVA you will need to ask yourself if an IVA is right for you. You can apply online if you’d like us to contact you to help you find the ideal solution for your financial goals.

Is an IVA right for you?

Even if the insolvency practitioner signs off your mortgage request, finding a lender willing to give you a good deal may be challenging. If you are currently renting a property on an IVA then the IVA should not impact your housing situation. However, you should always check the terms and conditions of your rental agreement in advance. When IVAs are proposed, affordability will always be taken into account to make sure that you can afford your housing and other living expenses.

Can I get a mortgage after an IVA?

Yes, you may be able to get a mortgage after an IVA – this won’t necessarily rule you out. If you’re considering when to apply for your mortgage, we’d recommend waiting until a while after your IVA ends to allow you to rebuild your credit rating before applying for a mortgage. This should make it more likely that you have access to better mortgage deals.

If you apply immediately after you’ve completed your IVA, you may not get the most competitive mortgage rates due to your credit rating and might have to go to a specialist mortgage lender. However, if you focus on building your credit score before applying for a mortgage, you should eventually start gaining access to better offers. An IVA can also help you to write off some of your unsecured debts. You can see how much debt you could write off with our IVA calculator.

Should you seek out IVA mortgage specialists?

Mortgage applications and rates vary from lenders. However, with a specialist IVA mortgage lender, any offer you receive might have a higher rate of interest applied to it. You might also find that the amount of deposit you’re asked to pay upfront will be higher than normal. However, if your current financial circumstances indicate you can afford to keep up with the repayments, you may be able to secure the mortgage straight away.

Do you have to declare an IVA on your mortgage application?

Many mortgage lenders ask if there have been credit issues in the past, such as having an IVA or declaring Bankruptcy. Even if the IVA no longer shows on your credit file, you need to let them know if they specifically ask, as this could cause you more difficulties in the future if you don’t. However, this doesn’t necessarily mean that you won’t be able to get a mortgage – it’s just something to be aware of when you’re applying.

How long does an IVA stay on your credit file?

An IVA will stay on your credit report for six years after the date that the IVA was approved or until the IVA is completed, if this date is later. Once the IVA has been completed it will be taken off the Insolvency Register, usually within three months of the completion report being issued.

Even if you complete the IVA early it will remain on your credit file for six years from the date it was approved. However, your credit file will be updated to say it has been completed. Although this may seem daunting, for many people an IVA may still be an ideal option. If you already have outstanding debts on your credit file, an IVA can make it more affordable to pay back those debts which could be a good decision for you in the long-term.

What deposit will I need if I've had an IVA?

The longer you wait after your IVA has completed to get a mortgage, the more likely it is you'll be able to get a mortgage with a smaller deposit. After a number of years, the IVA will have disappeared from your credit history and you might be able to get a mortgage with a deposit of 5-10%. However, if your IVA was more recent, you may be looking at a higher deposit of 15-25%.

Does an IVA affect a mortgage?

This completely depends on your circumstances. If you currently have a mortgage, your property could be affected if you choose an IVA. During the final year of the IVA, you might have to re-mortgage your home if your share of the equity is more than £5,000, based on certain criteria. If this isn’t possible, you may need to extend your IVA by another twelve-monthly payments. However, for many people, they may find that the advantages of being able to pay off their debts and keep their home outweigh these disadvantages.

If you have any questions about how an IVA will affect you, get in touch with one of our advisors today. We’d be happy to talk to you about your circumstances and see whether an IVA could help you get control of your finances.