What is an IVA?
An Individual Voluntary Arrangement or IVA is a legally binding document. It’s a formal agreement between an individual person and their creditors.
An insolvency practitioner will create one, the court must approve it and then it will be added to the Insolvency Register. Their job is to go over your finances and work out a payment plan to settle your debt. They will then act as an intermediary between you and your creditors for the duration of the IVA (usually five years).
If it’s accepted, any charges and interest on the account will be frozen, and your creditors will not be able to demand any more money. You then make payments to the insolvency practitioner who will deduct their fee (if applicable) and pay your creditors.
Provided you keep up with payments, any debt not paid at the end of the term will be written off. The record of the IVA will then be removed from the Insolvency Register.
Can I remortgage with an IVA?
Yes, it’s possible to remortgage with an IVA. Discussing your situation with a specialist adviser can make this process quite straightforward. At The Mortgage Centres, we will give you solid guidance and provide you with access to specialist mortgage lenders.
When speaking to a specialist broker, they will get to understand your circumstances. You’ll then be given solid recommendations for the most favourable route forward for your mortgage application.
Can I sell my house if I have an IVA?
Selling your house if you have an IVA is indeed possible. However, it can be complicated because your creditors may have a right to your assets if you convert them into cash.
For some, selling your house to clear your IVA is an attractive way to settle your debts. It can be also typical for an insolvency practitioner to demand that a property be remortgaged or sold if you have a high enough level of equity in it.
As your home is effectively security for the IVA and your creditors, you can’t sell it without consent from the insolvency practitioner or IVA firm. However, bear in mind that every IVA firm has their own terms and conditions.
You should also be aware of any adverse consequences of selling your house to end your IVA. Depending on how your IVA was set up, the insolvency practitioner could ask for significant costs in addition to the amount owed to settle it. Costing you more than if you had simply followed the terms of the IVA.
It may be possible to make an official offer for a final settlement. To do this;
- Calculate the remaining amount you owe to your creditors.
- Ensure you have enough equity in your property to cover that amount.
- Additionally, make sure you can cover an extra year’s worth of payments.
Once your IVA has reached the end of its term and has been satisfied, you are free to sell your house whenever you like.
Can I remortgage to pay off an IVA?
Yes, it is possible to remortgage to pay off an IVA. But before doing so it’s worth examining all the factors around your situation.
Remortgaging to pay off existing debts can be an attractive route for many. The interest rates offered could be less than for other kinds of secured loans or some credit cards. Whether this is true in your case will largely depend on the terms of your IVA. Bear in mind that your home will be used as security against the IVA.
Either way, it is highly unlikely that a high street lender will consider your remortgage application. Therefore, using a mortgage broker to access a specialist lender will be your only opportunity.
Mortgages after an IVA FAQs
- How long does an IVA stay on my credit file?
- What do I need to prove my IVA has been discharged?
- What do I need to prove my IVA has been discharged?
- Do I have to wait 6 years from when my IVA is discharged to get a higher loan-to-value?
- Will all lenders allow you to borrow money if you have had an IVA?
- Can I get a joint mortgage with an IVA?
- How long after an IVA can I get a mortgage?
An IVA will usually last for five years, during which time you will pay agreed instalments to your creditors to pay off your debt. When this period ends, the debts will be considered cancelled. Even if the IVA didn’t pay off everything you owed, you won’t have to repay the remaining balance to your creditors.
Your IVA will show on the Insolvency Register until it is removed after five years but will still show on your credit record for six years.
Once discharged, the Insolvency Practitioner will send you a completion certificate confirming you have made all the necessary payments. You should scan this and keep it in a safe place in case you need it in future.
Additionally, the Insolvency Service will take your details off the register and inform the main credit reference agencies in the UK.
We recommend you get copies of your credit reports from each of the agencies 4 or 5 weeks after you receive a completion certificate. You can then ensure all the information is correct and up to date.
When the IVA has been discharged, the Insolvency Practitioner will send you a completion certificate that confirms in writing that you have made all the necessary payments under the arrangement. You should scan this and keep it in a safe place in case you need it in future.
Additionally, the Insolvency Service will take your details off the register and inform the three main credit reference agencies in the UK – Experian, Equifax and Callcredit – to update their records. We recommend you also get copies of your credit reports from each of the agencies a 4 or 5 weeks after you receive a completion certificate to make sure that your details are now updated and correct.
Credit records span six years, and your IVA start date is the reference point for how long it will show on your file. If it started more than six years ago, it will no longer appear. However, the loan-to-value (LTV) ratio will depend entirely on the lender and their criteria, whether it still shows or not.
Generally, the more recent the IVA, the lower the LTV ratio you are likely to be offered. This is not dependent on the status of the IVA alone. The lender’s top concern is protecting their money. If they see you as a greater risk, they will establish terms to minimise potential losses if things go wrong.
There are lenders who will consider applications after sufficient time has passed. If you can show that your finances are back on their feet – maybe three years. Some lenders may be happy to lend if the IVA was recent and they can see it was settled.
In all cases, a specialist mortgage adviser will be able to help you find the best lender for you.
It is possible to get a joint mortgage if one applicant has an IVA on the credit record. However, you will have to use a specialist lender that isn’t accessible on the high street.
Furthermore, the lending criteria are likely to be strict when compared to a standard mortgage and increased costs may apply.
Typically, an IVA will last for 5 years. After this period, it will typically be easier to get a mortgage. Although it is still possible to obtain a mortgage during this period.
If you are looking to do so, reach out and one of our specialist advisers will be in touch.