Mortgages After an IVA
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Updated on May 16th, 2022
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What is an IVA?
An Individual Voluntary Arrangement (or IVA) is a legally binding document, it is a formal agreement between an individual person and their creditors. An insolvency practitioner – typically a qualified accountant or a solicitor – must draw it up, the court must approve it and it will be entered into the Insolvency Register.
The insolvency practitioner’s role is to go over your finances and work with you to create a payment plan to settle the outstanding debt – one that you can realistically afford, and that the creditors will accept. They will then act as an intermediary between you and your creditors for the duration of the IVA (usually five years), and will charge a fee for this service. If and when your creditors accept the proposal, all charges and interest on the account will be frozen, and your creditors will not be able to demand additional sums. You will then make payments to the insolvency practitioner as agreed, who will deduct their fee (if applicable) and send monies on to each of your creditors. Provided you keep up with the payments, any debt not paid off by the time the IVA period concludes will be written off, and you will not owe any of the creditors any more money. The record of the IVA will then be removed from the Insolvency Register.
Mortgages after an IVA Information
Mortgage after an IVA?
Trying to find a competitively-priced mortgage with a relatively low deposit can be difficult at the best of times. If you’ve suffered bad credit events in the past, it can be much worse. One of the main causes of the banking crisis towards the end of the last decade was the amount of ‘sub-prime’ lending – offering mortgages to people with a poor credit history, usually at high interest rates. Banks become too relaxed about their lending, and when it became obvious that large amounts of borrowers could not repay the loans, the crash occurred.
Since then, banks and building societies have been far more cautious about how much they lend, and who to. So, if you have an IVA or some other kind of black mark on your credit report, it is now increasingly difficult to secure a mortgage.
How long will an IVA stay on my Credit Record?
Like other adverse credit events, an IVA will remain on your credit history for six years. Even if your IVA period concludes after five years, it will stay on your credit report for another 12 months before it is removed. After this period, if you have stuck to the agreement, kept up with all payments without any other defaults, etc, then you should have a clean credit record.
This aside, even if you have a clean credit record, a lender is likely to ask if you have ever entered into any arrangements such as IVAs. You must answer honestly to this, and if the answer is yes then a mainstream lender will still be likely to decline your application, even though the IVA is no longer showing on either the Insolvency Register or your credit record.
You might have another issue if your credit record is clean, but also lacking any other history of lending. Lenders will be looking for proof that you are a low risk for a mortgage, and you need to demonstrate that you can responsibly borrow money and pay it pack, showing a pattern of regularly meeting payments on time.
To rebuild or restore your credit history, there are a number of things you can do, but your first port of call should always be your credit reports, so you can see for yourself where any problems lie, and find out what you need to do to put them right. You should contact the three main UK credit reference agencies – Experian, Callcredit and Equifax – to get copies of the information they hold on you.
What to look for on your credit report
Credit reports cover events during the last six years, and it’s important to check that all the information contained in your credit reports is complete, accurate and up-to-date. Pay attention to addresses, account balances, dates and names to ensure they are consistent and correct. You should also make sure there is no further adverse credit information after your IVA’s starting date to compound matters further.
In the event of any details being incorrect, you should contact the credit agency immediately and advise them of amendments. It may take a few weeks for changes to go through, so allow a little time before ordering more copies to check that amendments have been made.
How to get a mortgage after an IVA
You will invariably need qualified, expert help from a specialist broker to secure a mortgage with an IVA. Our experienced team of advisers will be happy to give you a free initial consultation and offer a no-obligation quote.
As we deal with the whole mortgage market for the entire UK, we have connections across a network of providers, excellent relationships with the specialist bad credit mortgage lenders, in-depth knowledge of all the products available and access to deals and rates you won’t find on the high street.
Can I Remortgage to pay off an IVA?
Put simply, yes it is possible to remortgage to pay off an IVA, but before doing so it’s worth examining all the factors around your particular situation. It’s important to remember that an IVA is designed to be an effective way of handling debts, when properly set up, and when it’s run its course, the debts will be viewed as settled with creditors unable to pursue you for more funds. However, in the meantime, having an IVA on your credit record will have a detrimental effect on your ability to get a mortgage, or remortgage, and you may feel that remortgaging your property to settle the debts under an IVA is the best route to follow.
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 even some credit cards, so it could make good financial sense. Whether this is true in your case will largely depend on the terms of your IVA and the payments you have committed to making. You should also bear in mind that your home will be used as security against the IVA, so an increase in equity through a rise in house prices can be in your favour.
Either way, it is highly unlikely that a high street lender will consider your remortgage application, as they tend to favour only those with conventional borrowing patterns and no adverse credit events on their records.
The good news is that our advisers and brokers routinely deal with the large number of specialist lenders who understand IVAs, and who could be willing to offer you a mortgage while one is still active, or a remortgage scheme to pay off the debt entirely. Every one of these lenders will have their own individual criteria as to what they will accept and the terms they offer, and once we have assessed your situation we’ll be able to determine exactly which lender will be best suited to approach, so that you can avoid further disappointment.
Your circumstances are unique. What might be the most favourable course of action for one person may not be right for someone else in a similar position. When looking at using a remortgage to pay off your debts – effectively using your home as security against a new loan – it’s advisable to get professional financial advice, so that you are aware of all the risks and opportunities that your case presents. If you have any questions, please do get in touch with our team at The Mortgage Centres today and find out what your options for a remortgage could be.
How do I Remortgage with an IVA?
It can be a straightforward process to remortgage with an IVA, as long as you discuss your situation with a specialist adviser who has in-depth knowledge of the market, such as a member of our team here at The Mortgage Centres. We’ll be able to give you solid guidance, get access to deals not found on the high street and match you with the right lender for your circumstances.
The process begins with a conversation. You will be able to have a free, no-obligation initial consultation with one of our expert advisers, who will ask about all the details around your current financial circumstances, your needs to remortgage and the IVA itself in order to get a complete picture of where you stand when it comes to applying for a new home loan. Once they have this information, they will use software that mirrors that used by lenders, to make an accurate assessment of your affordability and identify exactly which lender will be the most amenable to your case and best-placed to cater to your needs.
You’ll be given solid recommendations for the most favourable route forward for your mortgage application. It’ll then be entirely up to you if you want to take it further. Should you do so, we will be able to give you further assistance with each step of the application process to help you present your case in the best light, and liaise with the lender at every stage (sometimes even ahead of the formal application) to ensure it gets the best chance of success. The specialist lenders who offer mortgages or remortgages to people with poor credit will only accept applications made through trusted brokers, so you will need to work with an adviser such as one of our team.
The process of underwriting a mortgage with an IVA will need to be undertaken manually rather than dealt with by computer, due to the personalised nature of the application. This means a real person will be assessing your situation and making the decision, and you will not fall victim to the cut and dried results of an algorithm. Talk to one of our advisers today to find out what could be the best options to suit your circumstances.
Mortgage Lenders after an IVA?
With an IVA on your credit records, whether currently in effect or having been satisfied, you may find it difficult to arrange a mortgage with one of the high street lenders. Mainstream banks and building societies are still heavily influenced by the events of the 2008 financial crisis, which led to them becoming far more risk-averse and subject to more stringent lending rules and regulations. This means they tend to accept applications from only the easiest of borrowers with the most conventional credit histories, leaving people who may have experienced financial issues in the past with nowhere to turn when looking for a mortgage to own their own home.
In response, the market in specialist mortgage lenders and products has grown to meet this need for help for people in this sector. Specialist lenders each operate under their own criteria and are far more flexible in their approach to potential borrowers – including those with adverse credit events on their records. Although smaller, they still have to comply with the FCA’s rules for lending, and so your mortgage and your home are no less secure than they would be with a larger mainstream lender.
With this being the case, there are now plenty of lenders who consider applicants with an IVA, each with their own criteria for the nature of the arrangement, its registration and satisfaction. The mortgage market in general is fast-moving and highly competitive, with new offers and products being created all the time, so there has never been a better time for people with poor credit histories to get the home loan they need. The one thing to bear in mind is that specialist lenders typically only accept mortgage applications made through a professional intermediary, so you will need to work with a trusted broker, such as one of our team at The Mortgage Centres, in order to access their products.
The most suitable mortgage lender and product for you will depend entirely on your individual circumstances and the nature of your IVA. We’ll need to go over your own personal situation before being able to run our searches and make recommendations. To find out more about your options, contact us now to book a free, no-obligation initial discussion.
Can I Sell My House If I Have an IVA?
Selling your house if you have an IVA is indeed possible, but it can be quite a complex issue due to your creditors having a claim to your assets should you liquidate them into cash form. For some, selling your house in order to clear your IVA is an attractive way to settle your debts, give yourself a clean sheet and a solid foundation from which to start rebuilding your financial affairs. It can be also typical for an insolvency practitioner overseeing an IVA to demand that a property be remortgaged or sold if the owner has a high enough level of equity in it, or it has gained in value through natural rises in house prices.
As your home is effectively security for the IVA and your creditors, you will not be able to sell it without the consent of the insolvency practitioner or IVA firm. However, it’s worth bearing in mind that, like lenders, IVA firms can have very different terms and conditions from one firm to the next, depending on the background to your case and the value of your property – you’ll need to approach your IVA firm with this idea and have an understanding of their approach to clearing your IVA in this way. You should also be aware of any adverse consequences to selling your house to end your IVA. It’s never usually as simple as getting the funds and paying off what’s still owed.
Depending on how your IVA was set up and how much you owe, the insolvency practitioner could ask for significant costs and interest in addition to the amount owed in order to settle your IVA. This could work out costing you more than if you had simply followed the terms of the IVA through to completion as planned. It may be possible to try to make an official offer of final settlement if you calculate what is left to pay to your creditors and you have enough equity in your property to fund it, plus an extra year. The creditors may choose to accept this offer, but you should be clear that the IVA will continue as planned if they don’t.
The good news is that once your IVA has reached the end of its term and been satisfied, you are free to sell your house whenever you like. Importantly, you will need to be in receipt of your IVA completion certificate in order to proceed with the marketing and sale of your property.
As this is quite a complicated issue, with factors that could impact your future finances and ability to get a mortgage, we recommend getting in touch with one of our team to talk over your exact personal situation. In a free, no-obligation initial discussion, we’ll be able to give you guidance and advice as to what could be the right course of action for you going forward. What is best for one homeowner is not necessarily the same for another.
I Have an IVA - Can I get a Mortgage?
Being within the period of an active IVA can make it very difficult to get a mortgage, and while it is not impossible, your options will be quite limited, and likely subject to some challenging terms.
The main problem lies in being able to save up or obtain the necessary funds for a deposit while you are in an IVA. Your insolvency practitioner – who is overseeing your IVA and acting as the intermediary between you and your creditors – will basically want to see all available monies at your disposal (barring that for living expenses, as outlined in your terms) used to pay off the debts you owe under the arrangement. It simply might not be possible to put money by, or sell a higher value asset, for a deposit on a mortgage. What you can do will depend on the exact conditions of your IVA.
Your options will be further limited by the number of lenders available for you to approach. All mainstream providers will decline to proceed with any lending once they see you have an IVA to your name, whether it has been satisfied or is still current. The IVA will remain on your records for six years after it is spent, but even after that time if a lender asks you if you have ever been subject to an IVA, you have to answer honestly, and this can prejudice your application.
In order to get the mortgage you need in your circumstances, you will need to approach one of the more specialist lenders in the market who are willing to look beyond your immediate issues to grant you a home loan. While being more flexible in their criteria for lending, their products will usually come with higher than average interest rates and fees, and they will generally ask for a sizable deposit – expect to have to provide at least 30%.
If these terms are within your means then you may be able to proceed with a mortgage, but as with all dealings around loans on your property while you are in an IVA, it’s important for you to get professional advice from a specialist mortgage broker who is familiar with obtaining home loans with adverse credit issues. As well as helping you to understand all the associated processes and risks, they will make sure you get the most favourable deal in your circumstances.
IVA Mortgage Specialists
If you are looking to secure a mortgage after or during a period of an IVA, then it’s certain that you will need to speak to an experienced specialist adviser. They will ask the right questions to get a thorough understanding of your unique circumstances and identify all the options available to you in terms of the lenders and products you might be able to access with an IVA to your name. These lenders will, without exception, be those catering to the niche sector of the market for borrowers who have experienced adverse credit issues, and they will not be overly deterred by an IVA on your credit records.
You will not find these specialist lenders on the high street, and nor will they feature in any online tables or ‘best buy’ lists. They only consider mortgage applications made through a trusted intermediary, such as a professional specialist broker like ourselves at The Mortgage Centres. This serves to streamline the process and to make sure that no time or effort is wasted. The broker is able to assess the borrower ahead of making an official application, in order to prepare their case as thoroughly as possible and ensure that they are matched with the right lender to meet their needs. The lender also knows that the applicant will have been adequately vetted and will be a suitable candidate for their products.
As you will have seen in other sections on this page, getting a mortgage with an IVA can be quite a complex and personal process, with all aspects of the application and underwriting done manually. It’s quite a specialist area that takes an understanding of the way IVAs are set up, as well as a deep knowledge of the ever-evolving and competitive UK mortgages market. Offers and products are being created or withdrawn all the time, with terms constantly subject to change as the market and economy shifts.
To get specialist advice on getting a mortgage with an IVA, please contact us today to arrange your free, no-obligation initial consultation.
Mortgages after an IVA FAQs
- Can I still have a mortgage even though I am still in an IVA?
- How long does an IVA last?
- 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?
- How do I get an IVA?
It is possible, but your options will be more limited. Many lenders will not want to proceed with a mortgage application if they see you are still in an active IVA when they run a credit check.
Fortunately, specialist lenders exist who are not immediately deterred by this, but will ask further questions about your circumstances and will probably charge a higher interest rate, as well as asking for a larger deposit of minimum 30%. If terms like these do not put the mortgage beyond your reach, then you might want to talk to a specialist mortgage broker who will be able to offer advice and try to get you the best possible deal.
An IVA will usually last for five years, during which time you will pay agreed instalments to your creditors to pay off your debt. At the end of this time, the debts will be considered cancelled, although often the IVA might not have covered the entire amount owed, and any outstanding amount will be written off, and you will not owe any more money to those 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.
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 cover a period of the last six years, and your IVA start date will be the reference used for when it appears on your file. If it started more than six years ago, it will no longer appear, but the loan-to-value (LTV) ratio will depend entirely on the lender and their criteria, whether it still shows or not.
As with all adverse credit events, generally the more recent the IVA, the lower the LTV ratio you are likely to be offered. This is not dependant on the status of the IVA alone. The lender’s main priority is protecting their money, so if they think you are a higher risk, then they will set terms that ensure they potentially lose as little as possible if it all goes wrong.
Unfortunately not. Many lenders have very strict criteria and, even if the IVA happened so long ago that it no longer appears on a credit check, they are likely to ask you if you have ever entered into one. You must answer this honestly, even though it might mean they will decline your application.
While some lenders won’t lend to anyone who has been in an IVA, no matter how long ago it was, there are others who will consider applications after a sufficient amount of time has passed to show that your finances are back on their feet – maybe three years. Some lenders will even be happy to lend if the IVA was quite recent, if they can see that the IVA was settled. In all cases, a specialist mortgage adviser will be able to help you find the best lender to work with to get the best deal.
You’ll need to engage with an Insolvency Practitioner, who will go over your options and perhaps also apply for an interim order to stop any further action against you from creditors while he or she sets the IVA up. They will then help formulate a proposal to your creditors, outlining how you intend to pay them, and if enough of them agree the Practitioner will report this to the courts and the IVA will be binding on all parties.