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Mortgages After an IVA

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Can I get a mortgage after an IVA?

There is no reason why someone with an IVA to their name cannot apply for a mortgage. It will be more difficult, and is likely to cost you more in terms of a higher deposit, interest rate and fees, but there are specialist lenders on the market who have created products to suit those with a chequered financial history, and specialist brokers who can help you to get the best deal possible.

The impact an IVA will have on your credit rating is what will cause you the most problems when applying for a mortgage after an IVA. Most high street and mainstream lenders will reject your application as soon as they spot an IVA on your file during their standard credit checks to assess their level of risk. However, the other lenders specialising in bad credit mortgages will be prepared to offer you a mortgage with an IVA, albeit at a higher interest rate and with a larger deposit.

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Getting a mortgage after an IVA is possible, and specialist lenders will assess the merits of each application on a case-by-case basis, but to ensure your case is matched to the best lender, you should get advice from a specialist bad credit mortgage broker who has an overview of the whole market.

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?

Remember that an IVA is designed to be an effective way of handling debts, when properly set up, but having an IVA on your record will have a detrimental effect on your ability to get a mortgage, or remortgage. However, we deal with many specialist lenders who understand IVAs and might be willing to offer you a mortgage while one is still active, or to remortgage to pay off the debt entirely.

How do I Remortgage with an IVA?

It can be a straightforward process to remortgage with an IVA, as long as you have a specialist adviser with in-depth knowledge of the market, who can 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 of underwriting a mortgage with an IVA will need to be underwritten manually rather than dealt with by computer, due to the personalised nature of the application, meaning a real person will be assessing your situation and making the decision.

Best Mortgage Lenders after an IVA?

As mainstream banks have shied away from borrowers who may have suffered financial difficulties, the market in specialist lenders and products has grown to meet the need for help from people in this sector. There are now plenty of lenders who consider applicants with an IVA, each with their own criteria for nature, registration and satisfaction, so there has never been a better time for people with poor credit histories to get a mortgage.

To find out the best one for you, we’ll need to go over your own personal situation. Contact us now to book a free, no-obligation initial discussion.

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.

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