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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 May 2021*

Most borrowers are aware that being in an individual voluntary arrangement (IVA) can significantly reduce any options you may have when it comes to new credit, especially on mortgages.

But what about getting a mortgage after an IVA? And is it easier if you want to remortgage?

Thankfully, there are lenders out there with an appetite for helping borrowers in such circumstances.

If you have the right amount of equity, a suitable property and meet the usual borrowing requirements including income and affordability you should be able to find a lender willing to help you remortgage after an IVA.

In this article, we cover:

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Can you get a mortgage after an IVA?

You can get a mortgage after an IVA, though you’ll likely get a better deal with a historical IVA, so the longer you can leave it the better. You’ll likely get the best deals once it drops off your credit file after 6 years or once you’ve finished paying it off if it takes longer than 6 years.

If you’re applying for a joint mortgage when one applicant has bad credit, (e.g: partner has an IVA)  then both of your circumstances will be taken into consideration and looked at, that includes your partners IVA or other bad credit issues.

Are there mortgage lenders that consider IVA mortgages?

In short, the answer is currently yes although it is more severe than e.g. getting a mortgage with a CCJ or getting a mortgage with defaults. 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 the debt, date of settlement (if repaid), the exact info recorded on your credit reports before allowing a mortgage credit check to be completed.

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.

For certain borrowers, it is possible to:

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

How soon after an IVA can I get a mortgage?

Some lenders will 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.

Other lenders demand the IVA to be settled and paid off 3 years before they will consider an application and some lenders want it to be settled prior to application.

However, there are some lenders who will be happy to lend so long as the remortgage is used to pay off the IVA; and in a few cases, lenders are happy to lend to borrowers with an active IVA.

Typically, the more recent the IVA was set up and/or settled, and the more other credit issues are on record, the higher the amount of deposit or equity you’ll need and the higher the cost of the borrowing.

The perceived risk to the lender is always going to be higher when lending to someone who already has arrangements on unpaid debts. Understandably, this will have a knock-on effect on rates charges.

You should expect to pay rates higher than a regular mortgage would charge 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?

The way your property will be dealt with following an IVA will be included in your IVA proposal.

A copy of the property terms will be sent to you at the time your IVA provider starts the review, usually 6 months prior to your IVA finishing.

As part of the review, your IVA provider should:

  • Ask your secured lenders for a current statement (showing how much it will cost to pay off your mortgage)
  • Get a valuation of your property
  • Send a copy of the IVA proposal property sections to you

A remortgage after an IVA is based on 85% loan to value of your property.

This is calculated by reducing the value of your property by 15% and then subtracting the amount left on your mortgage. The remaining amount is the equity available for your IVA.

Once this calculation is completed, your IVA provider should write to you to confirm the outcome and explain the action you will need to take.

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.

Once you have copies of your files, make an enquiry and we will pass you on to one of the expert bad credit mortgage brokers we work with.

Get your credit rating

They will discuss all your circumstances and offer you advice, based on all the facts. 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 and affordability (usually borrowing no more than 4 times your income for adverse credit mortgages), age, suitable property etc.

You can find more information on how to remortgage with bad credit in our in-depth guide.

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 your 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 be more likely to lose your home.

If you would like to talk to someone about your own set of circumstances and get a clear understanding of the options available to you, get in touch and we’ll match you with one of the experts we work with who will be happy to answer your questions.

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 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 typically happens 3 months after you receive your completion certificate).

Impact of other credit issues on mortgage applications

If you have an IVA it’s also likely you’ll have other associated credit issues that led 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 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 underlie 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.

Finally, if you have any payday loan usage on your file in addition to the IVA, getting approved could be less straightforward. If you’re applying for a mortgage after a payday loan, you might find your options limited as most lenders are wary of customers who’ve had to fall back on them.

How to get a mortgage after an IVA

While it may be possible to get a mortgage after an IVA, it’s rarely straightforward because every lender works from different credit reports and not all credit agencies report the same facts. So one of the first things you can do to help yourself prior to looking for a lender is to check your credit reports.

Depending on all your circumstances, it may be possible to get a mortgage after an IVA. Going direct to a high street lender could result in you being declined, particularly if your IVA is currently active, so the best approach is to find a mortgage broker experienced in dealing with customers in similar circumstances.

With the help of the right broker, although you may not be considered for the lowest mortgage rates, you may find some specialist lenders who may still be willing to offer competitive rates.

Ahead of doing anything else, get credit reports from all three top agencies and then make an enquiry and we’ll connect you with one of the expert mortgage brokers we work with. The experts we work with are experienced in helping people with all kinds of bad credit issues. We’ll match you with someone who is used to dealing with customers in similar situations to yours.

As a general rule, if you have bad credit of any kind on your credit report, the higher the deposit you have and the greater your affordability, the more options you will have of finding the right mortgage with good terms.

Speak to an expert

If you have an IVA and want to know if you can remortgage to pay it off or are in an active IVA and want to know all your options with regard to a property you own, speak to one of the expert mortgage brokers we work with.

Call 0808 189 2301 or make an enquiry for a free, no-obligation chat. We’ll match you with a broker who has experience of helping other customers in similar circumstances.

Updated: 7th May 2021
OnlineMortgageAdvisor 2021 ©

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 information 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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