IVA Mortgages
There is no reason why someone with an IVA cannot apply for a mortgage. It will likely be more difficult and cost you more in fees, such as deposit and interest rates. However, there are specialist lenders on the market who have created products to suit those with a chequered financial history.
Get in touch for a free initial, no-obligation discussion about your mortgage situation.
- What is an IVA?
- Try our Bad Credit mortgage calculator
- I have settled my IVA: When can I apply for a mortgage?
- Can you get a mortgage with an IVA?
- What mortgage lenders are available after an IVA?
- Can I remortgage with an IVA?
- How to improve your chances of getting a mortgage after an IVA
- Specialist IVA mortgage broker
- Frequently asked questions
Can I get a mortgage after an IVA?
The IVA’s impact on your credit rating is what causes you the most problems when applying for a mortgage. When assessing a mortgage application, lenders will look at your credit score and it will play a big part in how they view you as a borrower.
If they see any sort of bad credit issues on your file it will instantly raise a red flag, as they will perceive you as a risky borrower. In turn, this can make it more difficult to find mortgage options and if you do find products, they may have special conditions imposed, like higher interest rates or larger deposit requirements.
Most mainstream lenders will reject your application as soon as they spot a recent IVA on your file. However, there are lenders specialising in bad credit mortgages that may be prepared to offer you a mortgage if you have or previously had an IVA.
Mortgage Applications
Understanding how the mortgage application process works can ensure you are prepared when looking for a deal that suits you.
Loans with Bad Credit
If you’re looking to get a secured loan or bridging loan with bad credit, you may face some hurdles. We can offer you the best advice for your situation.
Mortgage Affordability
Your affordability will always be assessed when it comes to mortgages. Read our guides to help you prepare for your next steps.
- What mortgage can I get on my salary?
- What stops you from getting a mortgage
- Can I get a low income mortgage?
- What to do if you can't afford a mortgage
- What is the longest mortgage term in the UK?
- A guide to bank statements for mortgage applications
- Obtaining a Joint Borrower, Sole Proprietor Mortgage
- Try the mortgage affordability calculator
I have settled my IVA: When can I apply for a mortgage?
Applying for a mortgage once your IVA has been settled is much more favourable compared to if you were still in an IVA. Lenders don’t impose a minimum time that must have passed since the IVA was settled. Instead, the more time that has passed, the better your chances of success.
On top of this, a number of other factors will also influence your application. Things like your more recent credit history, your income, deposit size, and the lender you approach, will also play a big part in your chances.
You should also keep in mind that any bad credit issues will be removed from your credit file after six years, although waiting for this time to pass before you apply isn’t feasible for many individuals.
Instead, consulting the support and expertise of a mortgage broker can prove invaluable. They will be able to assess your situation, like a lender would, and determine if it is the right choice for you to apply.
On top of this, they will have access to specialist bad credit lenders who aren’t directly available to the public. This way, you can maximise your chances of success and hopefully obtain a mortgage.
Can you get a mortgage with an IVA?
Being within the period of an active IVA can make it very difficult to get a mortgage. While it is not impossible, your options will be limited. The main problem lies in being able to save up or obtain the necessary funds for a deposit.
Your insolvency practitioner will want to see all available monies at your disposal (barring those for living expenses, as outlined in your terms) used to pay off the debts. It simply might not be possible to put money by or sell a higher-value asset for a deposit on a mortgage.
All mainstream providers will decline to proceed with any lending once they see you have an IVA to your name. The IVA will remain on your records for six years after it is spent. Even after that time, if a lender asks you if you’ve ever been subject to an IVA, you must answer honestly.
To get a mortgage, you will need to approach a specialist lender who is willing to look beyond your immediate issues. However, their products will usually come with higher-than-average interest rates and fees.
The amount of deposit required will heavily depend on how much time has passed since the IVA. Remember, the more time that has passed, the lower the deposit requirements will be. This is because by providing a larger deposit you are mitigating your lender’s risk exposure, as they won’t need to lend as much against the value of the property.
This means that if you were not able to make payments, your lender would not have as much money tied up in the property compared to someone that provided a smaller deposit.
If you are currently in an IVA or have very recently settled one, you may require a minimum deposit of around 30%.
If 6 years has passed and the IVA is no longer on your credit file, you may expect lower deposit requirements. For example, you may only be required to put down 5% to 10% of the property’s value.
Keep in mind that a range of other factors can influence how much deposit you will need. Things like your income and more recent credit history will all influence a lender’s requirements for your application.
It’s best to speak to a mortgage broker, who can give you the most accurate idea of your deposit requirements based on your circumstances.
What mortgage lenders are available after an IVA?
As mentioned, you are most likely not going to be able to access your normal high street lender shortly after you’ve settled an IVA. Instead, you’ll need a lender who specialises in bad credit.
Although they are smaller than mainstream banks and building societies, they still must comply with the FCA’s lending rules, meaning your home is just as secure.
There are plenty of lenders who consider applicants with an IVA, each with their own criteria for the nature of the arrangement. As the mortgage market is fast-moving and competitive, there are new offers and products being created all the time. There has never been a better time for people with poor credit histories to get the home loan they need.
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 to access their products.
Can I remortgage with an IVA?
It’s possible to remortgage with an IVA. Discussing your situation with a specialist advisor 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.
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, so using a mortgage broker to access a specialist lender will be your only opportunity.
Selling your house if you have an IVA is 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 also be 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.
How to improve your chances of getting a mortgage after an IVA
If you are looking to get a mortgage after an IVA, there are a few steps you can take before you apply to put you in the best position for success:
Taking steps to improve your credit score before applying for a mortgage after an IVA can be key. Your credit history plays a big part in a lender’s affordability assessment and can make or break you getting a more competitive mortgage product.
If you have previously had an IVA within the past six years, then it will be in your credit history for lenders to see. If your more recent credit is also bad, this will raise concerns for lenders.
So, improving your recent credit is a great way to show lenders that you are now able to better manage borrowed finances.
By providing a larger than average deposit, lenders will find your application much more attractive compared to someone in the same position with an average deposit.
This is due to the reduced risk a lender would be taking on, as they will not have as much of their money tied up in your property. Therefore, if you were unable to make payments, it wouldn’t impact them as much as someone who borrowed more and put down a smaller deposit.
An IVA completion certificate is a document that recognises that you have successfully completed your IVA and are no longer legally tied into the agreement with the insolvency partners and creditors you owed money to.
Your completion certificate will be sent to you by your insolvency practitioner in the form of a letter[1].
The certificate is a great way to show lenders that you are now out of an IVA and no longer in debt.
Specialist IVA mortgage broker
It is evident that getting a mortgage with an IVA can be quite a complex and personal process, so using a specialist mortgage broker with extensive industry knowledge will help you massively. They will ask the right questions to help understand your circumstances and identify a specialist lender for you to use.
To get specialist advice on getting a mortgage with an IVA, please contact us today to arrange your free, no-obligation initial consultation.
FAQs: Understanding the effects of 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. An insolvency practitioner’s 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.
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.
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 advisors will be in touch.
References
[1] PayPlan, What is an IVA Completion Certificate? (n.d.) – https://www.payplan.com/iva/iva-completion-certificate-2/
Phil Scott
Director
About the author
Phil has worked in the financial services industry since 1992, having started with a large insurance company. He went self employed in 1996 as an Independent Financial Adviser before setting up his first company, Needham Market Home Financial in 1999.
After four years, he decided to concentrate solely on mortgages and related insurances, and The Mortgage Centres was born. Since then, Phil has been influential in the opening of several new offices as the business continues to grow.
Qualifications
Financial Planning Certificate: 1, 2 & 3 | Year Attained: 1992
Certificate in Mortgage Advice and Practice (CEMAP) | Year Attained: 2001
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