Mortgaging With an IVA – Can You Do It?

An IVA (Individual Voluntary Arrangement) is a formal agreement between you and your creditors. This legally binding agreement allows you to pay back what you owe at an affordable rate over a set period.

But what if you’re struggling with debt? Can you get a mortgage with an IVA?

Keep reading to find out.

Can You Get a Mortgage with an IVA?

If you’re struggling to meet your debts, an IVA can be helpful. It freezes higher interest rates and prevents lenders from taking legal action against you.

Does IVA affect mortgage?

Having an IVA won’t mean you can’t get a mortgage, but it can affect mortgage rates.

You may have to put down a bigger deposit or pay a higher interest rate. An IVA also reduces your credit score, which could make it more difficult to get approved for a mortgage.

Moreover, taking up a mortgage may also put the IVA at a high risk. This is so because the agreement exists to help you get back on track with your finances.

How Does an IVA Impact My Mortgage Application?

The IVA can determine whether you can get a mortgage, but it all depends on the lender.

Some lenders view an IVA as a serious negative on credit rating. This means they will decline any mortgage application from someone with one in place. Other lenders may be more willing to consider your application but will require a larger deposit. If not, they will charge a higher interest rate.

The good news is mortgage approvals have risen sharply after the pandemic, according to mortgage statistics.

If you’re hoping to get a mortgage, speaking to a mortgage broker or a lender about your situation is important. Only then will you be able to plan and ensure you’re in the best possible position to get the mortgage you need.

Do I have to declare IVA on mortgage application?

Yes, you absolutely have to. Not only is it extremely important, but you’re also legally obliged to do so.

If you fail to disclose this, it will, regardless, come up in the lender’s credit checks since it is listed on your credit file. Therefore, it’s a bad credit and not worth the risk, so always specify this information beforehand.

How much can you borrow with an IVA?

The set limit is £500. Any credit exceeding £500 you wish to get while in an IVA requires prior written permission from your insolvency practitioner and, in some cases, your creditors.

Can you get a mortgage while in an IVA?

The simple answer is yes. Nothing legally stops you from getting a new mortgage even while in an IVA, although the changes are much lower.

With that said, speak to your trustee or insolvency practitioner. They can advise you on the best action and help you find a lender willing to work with you.

They will consider several things in your credit file. Such things range from your debt repayments to the income amount you have left over.

Getting a Mortgage After an IVA

You’ll need to do a few things to get approval for a mortgage after an IVA. If you can meet all of these requirements, you should be able to get a mortgage after your IVA.

• Pay off your debts and meet all the terms of the IVA. Having a clean credit file is a must.
• Prove that you’ve made regular, timely payments for at least 12 consecutive months. This shows lenders that you’re now financially responsible and can trust you to make timely mortgage payments.
• Improve your credit score. If you defaulted on any payments during your IVA, this will likely have damaged your credit score. You’ll need to rebuild your credit before applying for a mortgage.
• Save up for a down payment. Lenders will often require a larger down payment from borrowers who have been through an IVA. So, it’s important to start saving as soon as you’re discharged.

If you get one, you can reduce the amount you owe by opting for an offset mortgage.

Can I remortgage with an IVA?

Yes, it is possible to remortgage with an IVA. However, prepare to meet certain restrictions.

First, the amount you can borrow will be restricted. In other words, you will be able to borrow up to 85% of the value of your property. Second, you can only borrow money up to four times your gross income or three times if you have a low income.

Finally, you can only remortgage to settle your Arrangement early.

Can I get a joint mortgage with an IVA?

Yes, you can get a joint mortgage even with an IVA. That said, lenders will evaluate the overall strength of the joint mortgage application. In other words, if one of the two mortgage applicants has an old IVA, the chances of getting reasonable rates will be much higher.

Will I Need IVA Mortgage Lenders in the UK?

IVA specialist lenders differ from other specialist mortgage lenders and mortgage brokers in key ways. They have extensive experience dealing with IVAs and know how to get the best results for their clients.

If you are considering an IVA, speaking with a an IVA specialist mortgage lender is important. You don’t necessarily need an IVA specialist mortgage broker to get a mortgage, but they can help you understand your options. On top of that, they ensure that you get the best possible outcome for your financial situation.

Bottom Line

So, can you get a mortgage with an IVA?

Yes!

Although mortgages with an IVA are rare, many lenders will accept an applicant with one in place. Therefore, always talk to your lender about your situation to get the best deal possible.