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Remortgage to pay off an IVA

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 7th October 2019 *

Most borrowers are aware that being in an IVA can pretty much dry up your options when it comes to new credit, especially on mortgages. Thankfully, there are currently lenders out there with an appetite for such arrangements, so long as you have the right amount of equity and meet the usual borrowing requirements including income, affordability, and suitable property.

In this article, we'll be looking at:

For certain borrowers it is possible to:

  • Remortgage to pay off an IVA
  • Remortgage whilst still in an IVA
  • Remortgage after an IVA

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Are there actually any lenders that consider IVA mortgages?

In short, the answer is currently yes. It all depends on your individual circumstances, and your advisor should go through all the necessary info with you in detail, in terms of equity/deposit, date of registration, size of debt, date of settlement (if repaid), the exact info recorded on you credit reports, etc etc.

Ideally to have the scope of most lenders who consider IVA remortgages, you will need to have conducted repayments satisfactorily throughout the time you've had the IVA. Every lender is different in their criteria and each will have a different stance on how they interpret the impact an IVA, historical or current, will have on their willingness to lend.

How soon after an IVA can I get a mortgage?

Some lenders will flat out decline anyone who's ever had an IVA; some require the IVA to have been settled years before and for all record of it to be completely off the credit file; some lenders demand the IVA to be settled and paid off 3 years before they will consider an application; some lenders want it to be settled prior to application; some will be happy to lend so long as the remortgage is used to pay off the IVA; and in some cases lenders are happy to lend to borrowers with an active IVA.

Typically the more recent the IVA was setup and or settled, and the more other credit issues are on record, the more deposit/equity you'll need and the higher the cost of the borrowing. The perceived risk to the lender is clearly going to be higher when lending to someone who already has arrangements on unpaid debts, so understandably rates are higher than the high street and the amount of equity required is between 30-40% of the property value (ie. a maximum loan of £140,000 on a £200,000 house).

How do I remortgage with an IVA?

Before you do anything else, if you haven't already done so, it's crucial to get copies of your credit files to see exactly what's showing on your report. Every lender uses a different reference agency (some more than one), and strangely every creditor you hold an account with is only legally required to report information about your payment conduct to 2 out of the 3 agencies. This means that your reports will often look very different which can have a real impact on the lenders who'll accept you.

So often borrowers and mortgage brokers are surprised when their customers are declined when they have only reviewed one of the reports thinking their customer was clean credit, to find that the lender has used a different report and errors or discrepancies exist. You and your advisor really ought to review all 3 reports before making any applications. If you haven't already, you can sign up for your free trials here:

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Once you have copies of your files, please complete an enquiry and we will pass you on to one of the advisors - they will check your circumstances and offer you the best advice. Remember that alongside the right account conduct and equity in your property, you will also still need to conform to standard mortgage criteria such as income/affordability (usually borrowing no more than 4 time your income for adverse credit mortgages), age, suitable property etc.

Can you lose your home with an IVA?

One of the main advantages of opting for an IVA over a bankruptcy order is that your home is protected and you don't need to sell it in order to pay off you debts. With an IVA, you'll pay back a set amount each month for a number of years (typically 5) and you should be able to keep your home, so long as you keep up with the payments.

If you're unable to meet the payments, your insolvency practitioner can ask the court to make you bankrupt, from which you would lose your home.

For more information, make an enquiry and we'll get back to you shortly

Can I sell my house while in an IVA?

You could sell your property and buy a cheaper one, though once you factor in the additional costs such as legal fees, evaluation fees, stamp duty etc, you may not have raised as much as you’d like.

If your creditors arrange an IVA, you'll pay back a set amount per month for a number of years (typically 5), then during the last year they'll typically ask you to obtain a valuation of your property. If you have enough equity in your home, they may ask you to attempt to remortgage to release equity and pay off the remainder of your loan. If you don't have enough, then you'll pay for a further 12 months.

Once your IVA is complete you are free to sell your home, though it’s better to wait until you have your IVA completion certificate. This certificate is a confirmation that you have completed your IVA and you no longer owe any debts to creditors. You may also wish to wait to be removed from the Insolvency Register (which will typically happen 3 months after you receive your certificate).

Impact of IVAs and other credit issues on mortgage approvals

If you have an IVA it's also likely you'll have other associated credit issues that lead up to the arrangement being made. Usually these start with late payments when the issues leading to the IVA began (often caused by a life event like a separation or bereavement) that then develop into defaults, CCJs and debt management plans. An IVA is usually taken as an alternative to declaring bankruptcy, so many who enter them tend to avoid both bankruptcy and repossession.

Lenders who accept the IVA are usually accepting of the preceding issues that underly it, but this depends on the date the IVA was registered and also the payment conduct since. If you have had numerous issues and entered an IVA very recently, then the amount of deposit you need will be higher, as will the rate of interest you'll pay.

Updated: 7th October 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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