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Mortgage after an IVA

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Mortgage after an IVA

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Last reviewed on 9th November 2021

We’re often asked if getting a mortgage with an IVA is possible. Although a mortgage after an IVA is possible, it largely depends on your individual circumstances.

Selecting the right lender is crucial, as mortgages after IVAs generally require specialist lenders, but this isn’t always the case.

Prior to the banking crisis, lenders were a lot less restricted in approving mortgages with bad credit. This meant that getting a mortgage with an IVA wasn’t so difficult. That being said, this added to a multitude of existing problems in financial markets.

It’s often stated that offering best buy deals to borrowers with poor credit was one of the major contributors to the financial crash.

Fast forward to the present and lenders are more cautious when approached with bad credit. It can be difficult to get a mortgage with an IVA, never mind a great rate, but it is possible with the correct approach.

UK mortgage rates are still very competitive which means bad credit mortgage rates can also be attractive.

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What is an IVA?

An IVA is an abbreviation for Individual Voluntary Arrangement. An IVA is a formal and legally binding agreement between an individual and their creditors to pay back debts over a period of time.

IVAs are arranged by insolvency practitioners who are either qualified solicitors or accountants. The IVA must be approved by a court and then recorded on the Insolvency Register.

An insolvency practitioner will arrange the IVA by assessing your financial situation. After the assessment, the practitioner will produce a payment plan that suits your affordability.

The practitioner will also consider your creditors and what they’re hoping to achieve from the IVA. This is then communicated with your creditors during the IVA, which is usually for around five years.

Once the IVA has been accepted by your creditors, charges and additional interest will freeze. Creditors will also be unable to demand payments from you during the IVA.

The agreed debt is then paid monthly to the insolvency practitioner who will then pay your creditors, whilst deducting their own fee.

If there’s any remaining debt once the period of time for the IVA has passed, it’s usually written off. At the end of the IVA, you no longer owe creditors any money. The record of the IVA is then officially removed from the Insolvency Register.

Can I get a mortgage after an IVA?

The short answer is yes, it is possible to get a mortgage after an IVA. Although you may not be considered for the lowest mortgage rates, specialist lenders may still be able to offer some competitive rates.

Getting a mortgage after an IVA isn’t a straightforward process. Applying with a high street lender can result in you being declined, especially if your IVA is still active. The main issue here is that an IVA will show up on your credit file.

One of the main areas lenders will investigate during their assessment is your credit report. Lenders will consider you to be high risk due to your IVA. Having an IVA can heavily influence a lender’s decision on whether to approve you for a mortgage.

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

To get a mortgage after an IVA, you may need to seek 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 a mortgage, you may have to pay higher interest rates in addition to paying a larger deposit.

Each mortgage application varies, therefore lenders assess each case individually, so there isn’t one correct answer for everyone. You may be offered some great rates without needing a large deposit.

Mortgage approval depends on your financial circumstances and what you hope to gain from your mortgage. If you’re still unsure, you can ask our expert mortgage advisors a question.

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How long will an IVA stay on my credit file?

An IVA will usually stay on a credit file for six years from the date that it’s officially registered.

Even if your IVA was settled in less time, it will still be evident on your credit file. Your credit report should be clear once you’ve paid your creditors AND six years have passed.

This isn’t just the case for an IVA, typically any credit issues registered over six years ago shouldn’t appear on your credit file.

It’s important to note that even though your credit file may be clear after six years, lenders usually ask borrowers to declare if they’ve had credit issues. This can include whether or not you’ve ever entered into an IVA.

Never be dishonest to lenders as this won’t do you any good now or in the future. Once declared, lenders may still decline your application, even with a clean credit file.

Many borrowers assume that having a clean credit file will assure them a mortgage, but this is untrue. Your mortgage could be declined even with a great credit score.

There are many other factors for lenders to consider such as affordability, whether or not you have any other loans and your spending habits in general. These are just some of the factors that lenders will investigate in addition to your credit file.

Check your credit report prior to applying for a mortgage with an IVA

You can also check your own credit report before approaching lenders. The three main credit agencies are Equifax, Experian and TransUnion. Simply viewing your credit file won’t harm your credit score or leave a footprint of any kind.

Checking your credit report will indicate what’s on your credit file and what isn’t. These are the credit agencies that lenders will usually check but some credit agencies can make errors, so it’s important to check them for yourself.

How to get a mortgage after an IVA

Trying to get a mortgage after an IVA isn’t easy. It’s extremely difficult going at it alone as most high street lenders don’t offer mortgages with bad credit.

Although specialist lenders work with borrowers with credit problems such as IVAs, it’s not as simple as just approaching them and getting a mortgage.

An IVA will usually follow other credit issues such as late payments, CCJs and defaults for instance. This will only make you an even higher risk to a lender.

Severe credit issues such as repossession will make it extremely difficult to get a mortgage, but it’s still possible!

Preparing your mortgage application

Mortgage applications need to be correct from the start and should be placed with the right lender. To minimise your risk of being declined and to get the best available rate that you’re eligible for, utilise the expertise of a mortgage broker.

It’s important to speak to a broker who has specialist knowledge in the adverse credit market. This is because most conventional brokers don’t.

Choose a broker who has a clear plan for your mortgage and not just a broker who will ‘try and see’. Mortgage applications require a structured approach to minimise the risk of being declined.

Our mortgage advisors specialise in adverse credit and secure mortgages with bad credit on a daily basis. You can make an enquiry and speak to a specialist mortgage broker.

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Mortgage with an IVA FAQ

About the author

Mortgage Advisor | More Articles

Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.