Mortgage with an IVA – Full Guide

Obtaining a mortgage is a significant milestone in one’s life. Anyone contacting a mortgage firm will have to jump through some hoops, but getting a new mortgage is significantly more difficult for people who are currently in an IVA.

An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your creditors to return your obligations in an acceptable amount, implying that once your creditors have authorised it, both you and your creditors must adhere to it.

Many people dream of owning a home, but securing a mortgage may seem unattainable for individuals with a lot of debt and bad credit. An IVA could be a great way to start paying off your obligations and make your goal a reality.

In this post, we’ll go over how to acquire a mortgage with an IVA, including what an IVA is, how it affects your ability to get a mortgage, the procedures you’ll need to follow to get a mortgage while in an IVA, and whether getting a mortgage is easier when your arrangement is over.

Learn more about if an IVA is suitable for you and the factors to consider when deciding whether or not you can receive a mortgage with one.

What is an IVA mortgage?

IVA mortgage refers to a mortgage application made when you have an IVA on your credit report. IVA mortgages will most likely have higher interest rates than regular mortgages.

IVAs are a technique to fix a bad credit history without declaring bankruptcy. An IVA allows you to work out a plan with an insolvency professional to pay your creditors while remaining debt-free at the end.

Since an IVA is a legally enforceable arrangement that will remain on your credit report for six years after it has been completed, we collaborate with several specialised lenders willing to consider your unique circumstances and create a more flexible choice than ordinary lenders.

Can I get a mortgage with an IVA?

If you have an IVA, it does not always imply you won’t be able to secure a mortgage; nevertheless, it may make it much more complex and diminish your chances. While you’re in an IVA, any credit worth more than £500 requires prior written approval from your insolvency practitioner and your creditors.

Since an IVA’s purpose is to assist you in regaining control of your finances, taking out a mortgage can jeopardise the IVA. Most mortgage lenders, including specialist mortgage lenders, can also see your credit file and check for an active IVA.

However, an IVA might assist you in improving your financial situation to apply for a mortgage in the future. When you apply for a mortgage after your financial crisis has improved, you may be able to secure better rates and terms, lowering your monthly mortgage payments.

As a result, you should consult with your Insolvency Practitioner before filing any application. Click the button below to see if an IVA would benefit you and if an IVA is suited for you. Our team will work with you to find the best solution for your financial objectives.

What deposit will I need if I have had an IVA?

Mortgage lenders might require a deposit of at least 10%, if not more if you’ve had an IVA. However, it all depends on how long ago your IVA was. If your IVA was more than six years ago, you might be eligible for a 5% deposit. If your IVA were recent, you’d almost certainly require a higher deposit.

This will be determined by how long ago the IVA was resolved. The IVA will be removed from your credit history after six years, and you may obtain a mortgage with a 5% or 10% deposit.

A lender might want a more significant deposit if the IVA was completed within three to four years, ranging from 15% to 25%. You’re a riskier gamble in the eyes of a mortgage lender if you want to take out a 95% loan-to-value mortgage.

When you take out a large loan, there’s a chance that the value of your home will decrease below the amount owed. Negative equity is the term for this situation.

If you defaulted on your payments and the lender had to repossess your property, the lender may not be able to recover the whole amount of the loan. As a result, lenders will only grant a certain amount to people who have a good credit history.

In other words, you’re already considered a risky borrower because of your previous debt issues and if you’ve had an IVA. The mortgage company will then require a higher deposit to reduce that risk.

How does my IVA affect a joint mortgage application?

Getting a mortgage will be challenging if you have an IVA on your credit file. Credit checks are performed for this reason because lenders want to know how you’ve handled credit in the past.

Your credit report is one of the factors used by mortgage lenders to decide whether or not your loan application will be approved.

Although an IVA on your credit record indicates that you have had financial difficulties in the past, it can also suggest that you are responsible and have made apologies. In this regard, an IVA is far less damaging to your chances of getting a mortgage than a complete bankruptcy.

All mortgage lenders work by estimating the level of risk you represent. They reject applications where the benefit of taking out a home loan is insufficient to justify the danger.

Do I have to declare an IVA on my mortgage application?

Yes, in a nutshell. Many questions are asked on mortgage applications, and brokers want honest replies. They’ll probably question if you’ve ever had financial difficulties, including whether you’ve employed a debt solution or filed bankruptcy.

Many mortgage lenders will inquire about previous credit concerns, such as an IVA or bankruptcy filing. Even if the IVA is no longer on your credit report, you must inform them if they specifically request it, as failing to do so may result in further troubles in the future.

This isn’t a guarantee that you won’t be approved for a mortgage; it’s just something to keep in mind while you’re applying.

Will I need to remortgage on an IVA?

If you have equity in your home, you may be obliged to remortgage six months before the end of your IVA to pay a lump amount into your IVA under the conditions of your IVA.

If your portion of the available equity is less than £5,000, you are not required to take any more action because you have entirely adhered to the provisions of your IVA. This eliminates the need to refinance your home. Based on the agreed amount of payments specified in your proposal, your IVA will continue.

You’ll need to apply for refinancing if your share of the available equity is more than £5,000. You can do so by going to a mortgage lender of your choosing.

Your IVA provider should state in the letter that you must keep them updated throughout the remortgage procedure. If your mortgage lender agrees to lend you more money, you must provide written proof of the amount.

If you cannot remortgage, you must notify your IVA provider in writing. They should next go over your alternative options with you.

Remortgaging to release equity to pay into your IVA is not subject to the same restrictions as taking out a new mortgage. However, finding a mortgage provider that would lend to you while you’re on an IVA may be tricky.

Can I get a mortgage after an IVA?

In a nutshell, yes, it is feasible to obtain a mortgage following an IVA. Specialist mortgage lenders may be able to offer you some competitive rates even if you are not eligible for the lowest mortgage rates. However, note that obtaining a mortgage following an IVA is difficult.

If you’re thinking about getting a mortgage, we recommend waiting until your IVA is over to give yourself time to rehabilitate your credit. This should increase your chances of getting a better mortgage deal.

Due to your credit rating, you may not be able to acquire the most competitive mortgage rates if you apply right after your IVA is done, and you may have to go to a specialist mortgage provider.

But if you work to improve your credit score before applying for a mortgage, you should eventually be able to get better deals. Some of your unsecured debts may be forgiven with the help of an IVA.

How long after completing an IVA can I get a mortgage?

You can apply for a mortgage after settling your IVA, but you won’t be allowed to do so until the IVA is removed from your credit report, which will take at least six years after your IVA was agreed upon.

What mortgage deposit will I need for a mortgage after an IVA?

The amount of money you’ll need for a mortgage after an IVA will be determined by how long ago the IVA was completed and whether or not the IVA is still on your credit report.

If your IVA is still on your credit report, you can expect mortgage lenders to ask for a deposit ranging from 15% to 30% of the home price in some situations.

If your IVA is no longer on your credit report, you may be able to secure a mortgage with a typical deposit requirement of 5% to 15%.

The rationale for the high deposit requirements is that mortgage lenders see you as a risky customer and try to mitigate that risk by granting you a smaller mortgage, requiring you to put down a larger deposit.

Will I need a specialist mortgage lender due to my IVA?

You might need to look for a specialised lender if you want to secure a mortgage following an IVA. Borrowers who are currently in an IVA or have had an IVA in the past may be eligible for a mortgage from a specialist lender.

Since each mortgage application is unique, lenders evaluate each case independently. Thus, there isn’t one proper response for everyone. You might be able to get some fantastic rates without having to put down a considerable deposit.

Approval for a mortgage is based on your financial situation and what you anticipate gaining from it. Even if you are approved for a mortgage, you may have to pay higher interest rates and make a more significant down payment.

If you’re still hesitant, you may contact one of our knowledgeable mortgage consultants.

Can I get a mortgage after an IVA if I am self-employed?

If you are self-employed, you may find it more challenging to obtain a mortgage with an IVA because mortgage lenders also scrutinise the income of self-employed applicants.

As a self-employed borrower with an IVA, you should have completed the IVA at least 12 months prior and have self-employed accounts for at least three years.

Although, you may be able to find self-employed mortgage lenders who will accept you with at least 12 months worth of self-employed accounts with the help of a bad credit mortgage broker.

Can an IVA prevent you from becoming a first-time buyer?

Suppose you’re currently renting and considering purchasing your first home while on an IVA. In that case, this may increase your IP’s likelihood of approving your request, but only if it lowers your overall expenses, i.e. the cost of your mortgage repayments and bills is less than what you’re currently paying for rent.

However, the prospects are still limited, and that is simply the first obstacle. You’d still need to save up for a down payment and locate a mortgage lender willing to work with you.

Government schemes for getting a mortgage after an IVA

Some government programs are not limited to those with good credit. Still, those that say they won’t accept people with terrible credit don’t specify what they mean by “bad credit,” other than citing bankruptcy in some situations.

This is why it is critical to apply for any government schemes for which you are eligible, as you may qualify for a government scheme that can help you save money on your mortgage deposit or lower the property price you would have had to pay.

You may take advantage of local government-sponsored home-buying programs, depending on where you reside.

What can I do to increase my chances of securing a mortgage after an IVA?

You can increase your chances of getting a mortgage following an IVA. Typically, these are things that focus on excellent credit behaviour, such as:

Build your credit

To guarantee that your credit score is in the best possible form, you should focus on credit building. Here are a few things you may do:

  • Make sure you don’t have any late or missed payments on your credit card/s.
  • Become a registered voter.
  • To demonstrate good credit behaviour, get a credit builder card and loan.
  • Keep your credit usage rate below 30%.
  • You should avoid payday loans.
  • Applying for too much credit in a short period is not a good idea.
  • Report your rent (if you’re renting) to the credit bureaus.
  • Maintain open credit cards as long as you can.

Get low-value mortgages

You might concentrate your efforts on obtaining guarantor mortgages, bad credit mortgages, family deposit mortgages, or extremely low loan value mortgages, all of which lower the risk to the mortgage provider.

Make sure that you have closed debt accounts

The most straightforward approach to ensure that you will qualify for a mortgage after an IVA is to ensure you don’t have any other debt accounts open or outstanding auto loans or loans.

Try to increase your mortgage deposit

Having the largest mortgage deposit possible would likely boost the number of mortgage lenders ready to lend to you.

Summary

Although obtaining a mortgage following an IVA is possible, it is very dependent on your specific circumstances. Choosing the correct lender is critical because mortgages with or after IVAs typically require specialist lenders, but this isn’t always the case.

Getting a mortgage with an IVA, much alone a reasonable rate, might be challenging, but it is attainable with the right approach. Since UK mortgage rates are still competitive, bad credit mortgage rates can be appealing.

Articles usually only provide broad information and do not constitute financial advice. Utilise the experience of a mortgage broker to reduce your risk of getting declined and to receive the best available rate that you’re eligible for.

It’s critical to speak with a broker with experience in the adverse credit market. This is because most traditional brokers do not ensure that your chances of mortgage approval are boosted.

Choose a mortgage broker with a clear strategy in place rather than one who will ‘try and see.’ Find one who takes a systematic approach to reduce the chances of being turned down for a mortgage.

Our mortgage experts work with bad credit people and help them acquire mortgages daily. Reach out to one of our specialist mortgage brokers and inquire.

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