IVA mortgages: Can you get a mortgage with an IVA?

If you’ve struggled with debt in the past, you may have been provided with an Individual Voluntary Arrangement (IVA) to help you manage your repayments. And, if you now feel like you’re in a better place with your finances, you might be looking to buy a property.

Your previous debt problems will have left some marks on your credit report, though, which means you may need a bad credit mortgage. These are specifically designed for people who have struggled with debt, whether you’ve dealt with an IVA, CCJ, or even bankruptcy. But, they can also be more difficult to find, apply for, and secure. So, it’s well worth enlisting the help of a bad credit mortgage broker who can support you in finding the most appropriate mortgage product and hold your hand through the application process to give you the best chance of succeeding.

At The Mortgage Genie, we’re used to handling cases just like yours, so we can help! If you’ve previously been given an IVA and are now hoping to get a mortgage, contact us today. We would love to hear your story and help you purchase the property of your dreams.

We’re sure you have some questions you would like the answers to before you reach out, though, so we’ve put together this guide to everything you need to know when applying for a mortgage with an IVA. We’ll cover:

Read on to learn more.

What is an IVA?

An IVA — or Individual Voluntary Arrangement — is a legally binding agreement between a person and their creditors. This could be any person, company, or third party a borrower still owes money to.

IVAs are designed to help you manage your debt repayments if you’ve previously been struggling to make them and it feels like your credit is spiralling out of control. An IVA will essentially work as a payment plan that will allow you to consolidate your debts so you only need to make a single repayment towards them each month. You’ll then pay back your creditors over a period of what is usually five or six years. And, any debt that still remains after the agreed repayment period will be wiped.

If you require an IVA, this will be set up by a debt professional called an Insolvency Practitioner, and they will work on your behalf. They’ll talk to your creditors, make the necessary arrangements, and ensure that all of your necessary repayments are made. This can then help to prevent your financial problems from worsening and ensure you’re able to stay on top of everything.

How long does an IVA last?

An IVA typically runs for five or six years. Although, if you miss any of the agreed repayments, it will be extended. During the length of the agreement, there will be a range of rules you need to follow, and you’ll usually have limited control over your own money, as an Insolvency Practitioner will work on your behalf to ensure your repayments are covered.

How does an IVA affect your credit score?

If you get an Individual Voluntary Arrangement, this will be recorded on your credit report and your score will be negatively impacted. This is the main reason an IVA will affect your ability to get a mortgage — a low credit rating can make it difficult to borrow money, as lenders will see you as a high-risk borrower. It’s worth conducting a free credit check to see what your score currently looks like and whether there’s anything you can do to improve it.

How long does an IVA stay on your credit file?

As with most credit issues, your IVA will stay on your credit file for six years from the date it begins. If you’re in a position to do so, it can be worth waiting for your IVA to drop off your report before applying for a mortgage to get access to the best deals. It is also worth noting that many lenders simply won’t consider lending to you if there’s currently an IVA on your report.

Can you pass a credit check with an IVA?

It is possible to access certain types of credit with an IVA, but your options will be very limited. While still in your IVA, there will also be a cap on how much you can borrow, as the Insolvency Practitioner assigned to you will want to make sure that you can afford to pay back what you already owe before making any other financial commitments.

Once your IVA has been settled, you will have more borrowing freedom, but it will still show up on your credit file for six years. So, you may find that some lenders will turn you down for credit — especially if your IVA is particularly recent. Whether you pass a credit check will typically depend on a lender’s individual criteria, whether you’ve had any credit problems since your IVA, and how long ago it was settled.

Can you get a mortgage with an IVA?

It’s very unlikely you’ll be able to take out a new mortgage while you still have an IVA in place. Not only will lenders be very hesitant to provide you with a mortgage, but you’ll be required to follow very strict rules while still in your arrangement, and this will typically limit how much you can borrow.

This means you’ll usually need to wait until your IVA has come to an end before you start to apply for mortgages. This will be five to six years after your IVA is put in place.

Can I get a mortgage after an IVA?

Yes, once your IVA has been completed, it will be possible to get a mortgage. Although, it can be difficult — especially shortly after your IVA ends — and you may only have access to products from specialist IVA mortgage lenders and with high mortgage interest rates.

The longer it has been since your IVA, the more likely you’ll be able to get a mortgage. Although, you will need to ensure that you strive to keep your report clean following your IVA, and do everything you can to improve your credit rating.

How long after an IVA can I get a mortgage?

There’s no set amount of time that you need to wait after an IVA to apply for a mortgage. Some lenders won’t consider applications for anyone who’s had an IVA, but there are also specialist lenders who are specifically set up to deal with cases like yours.

The best way to determine and improve your chances of securing a mortgage after an IVA is to work closely with an expert mortgage broker who has worked with clients in a similar position to you. They will be able to look at your unique situation and talk you through your options. Plus, they’ll have access to products from specialist lenders that you wouldn’t be able to find yourself, which can make it a lot easier to secure the loan you need.

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

When you apply for a mortgage, you’ll typically need to answer a lot of questions about your income, your financial stability, and whether you’ve had any credit problems in the past. At this point, you will need to let your broker or lender know that you’ve had an IVA — even if it’s since dropped off your credit report.

If you lie on your mortgage application or fail to declare any relevant credit problems you’ve had, you will be committing fraud, and this could get you into trouble in the future. Honesty is the best policy.

Does an IVA affect your mortgage?

If you already have an existing mortgage when you’re given an IVA, your home loan typically won’t be affected and you’ll simply need to continue making the repayments as usual. But, if you’re looking to take out a new mortgage following an IVA, the products available to you will be quite limited.

IVA mortgages tend to have higher interest rates and you may also be required to put down a larger deposit. This will be decided by your lender.

Will I need to pay a larger deposit or higher interest rate for an IVA mortgage?

Yes, it is likely you will need to pay a larger deposit and a higher interest rate if you take out a mortgage following an IVA.

This is due to the fact that lenders will see you as a high-risk borrower because you have a history of struggling to pay your credit back. By asking for a larger mortgage deposit, they’ll lower how much you owe and therefore how much of a risk you pose. And, a higher interest rate means they’ll get a bigger return, which can help to offset the risk they’re taking.

Every mortgage application is unique, though, and your chosen lender will ultimately determine what you need to pay to secure your mortgage. A specialist broker will be able to help you find the most affordable and suitable deal for you.

How can I improve my credit score after an IVA?

It’s a good idea to focus on improving your credit score once your IVA has been completed, as this can help you to gain access to more mortgage products as well as reduce the overall cost. Here are some steps you can take:

  • Register to vote
  • Correct any errors on your file, and look out for future fraudulent activity
  • Make regular payments on time
  • Keep your credit utilisation low
  • Try to avoid moving home too often

If you can keep your credit report clean after settling your IVA and you’re able to increase your score to strengthen your application, you’ll be in a much better position to get an affordable mortgage.

Can you remortgage with an IVA?

If you already own a property when your IVA comes into force, there’ll typically be restrictions on it for the duration of your arrangement. This means you won’t be able to remortgage or sell your home without the permission of your IVA supervisor.

Any rules you need to follow regarding your property will be written into the terms of your IVA. It’s important you read these carefully so you understand exactly what kinds of restrictions you’ll be facing while your arrangement is in place.

At The Mortgage Genie, we know trying to buy a property after an IVA can seem daunting, but we’re here to hold your hand at every step of the way. We have a team of experts with years of experience in helping both first-time buyers and seasoned property owners to secure the mortgages they need, even if they have bad credit. Our mortgage brokers can also advise you if you’re looking to invest in a buy-to-let property or you would like to remortgage your existing home.

If you would like our support with finding and applying for the perfect mortgage, get in touch with us today. We would love to discuss your situation and help you move into a new property you love.