Mortgages after an IVA

If you have had financial trouble in the past, it might seem unlikely that you’ll ever get on the property ladder. But defaulting on a finance plan or loan in the past doesn’t mean a mortgage is impossible. Many lenders offer bad credit mortgages that could help you achieve your property goals. 

Mortgages after an IVA – exploring the options

An Individual Voluntary Agreement can make it very difficult to get a mortgage, but with the right lender and good advice, it is still possible to achieve your property goals.

What is an Individual Voluntary Agreement (IVA)? 

An Individual Voluntary Arrangement is a legal contract that an insolvency practitioner creates on your behalf. These people are usually qualified solicitors or approved accountants, and the IVA is a way of addressing a large debt that an individual owes to a company.

The IVA is an agreement between the company and the debtor to pay the money back gradually, and helps avoid bankruptcy. Interest on the debt may freeze but, depending on the size of the sum, it can take several years to repay.

How does an IVA affect my credit rating? 

Your credit history is an important way for financial providers to assess you as a potential customer. An IVA has a major impact on your credit score, because it’s an indication that you have fallen into considerable debt. It will certainly give you adverse credit.

The IVA will stay on your credit file for six years, and makes it very difficult to be approved  for a credit card, loan or other finance. 

What happens when an IVA has been settled? 

When you finish repaying the debt, the IVA closes. Your insolvency practitioner will send you a certificate of completion. 

Although the IVA will still show on your credit report, it will now be listed as ‘satisfied.’ At this point it should become easier for you to apply for financial products.

Can I get a mortgage with an IVA? 

It’s very rare for people to be offered a mortgage if they have an active IVA. But once the arrangement is satisfied, your chances will improve. 

Most high street brands won’t accept a borrower with an IVA on their file, but there are various specialist mortgage lenders that provide dedicated poor credit mortgages. 

It’s worth being aware that long after you have repaid the debt and it disappears from your history, some lenders will ask if you have ever had an IVA. They will often decline applicants who answer “yes” to this question.

Can I improve my credit rating?

Rebuilding your credit score takes time and there’s no magic bullet. But paying all your bills on time and keeping within your spending limits will help. You could also consider a credit card for bad credit, which can boost your credit if you use it for small purchases and make monthly payments to clear the balance. 

Will a mortgage after an IVA be affordable?

Some lenders certainly offer mortgages after an Individual Voluntary Agreement, depending on the specific situation.  But you should expect to pay a higher interest rate, as mortgage providers see you as a riskier customer. 

That said, if the IVA is no longer on your credit file (i.e. it was over six years ago) and you have stayed out of financial trouble, you could successfully apply for a mortgage from one of the leading providers.

With any mortgage, saving up a sizable deposit will give you much more choice and better mortgage rates. As a result, your monthly mortgage repayments will be lower. Raising a deposit of around 15-20% or more will put you in a good position. 

What’s crucial is that you can comfortably afford the mortgage repayments to avoid any future debt issues. A mortgage is a secured loan, so if you fall behind on payments you risk losing your home.

How can a Mortgage Broker help?

At Ideal Home Loans we’re dedicated mortgage experts, and it’s our job to help clients in all kinds of financial situations to understand their options. We will spend time getting to know you, your plans and your finances so that we can make recommendations that will suit your circumstances. 

Anyone who has had credit issues will really benefit from the support of a broker – especially as many of the more specialist lenders only accept mortgage applicants through companies like us. We will run various checks to make sure you meet the lender’s criteria and then guide you through the application process.

Ideal Home Loans Ltd are authorised and regulated by the Financial Conduct Authority. To find out more about how we can help, speak to an appointed representative from the Ideal Team today.