IVA Mortgages: Can You Get a Mortgage With an IVA?
If you’ve faced debt challenges in the past, you may have used an Individual Voluntary Arrangement (IVA) to manage your repayments. Now that you’re in a stronger financial position, you might be considering buying a property.
However, your previous debt issues will have left a mark on your credit report, which could make securing a mortgage more challenging. In this instance, a bad credit mortgage may be your best option. These mortgages are designed for individuals with a history of financial difficulties, whether that includes an IVA, a County Court Judgment (CCJ), or even bankruptcy.
That said, finding and securing a bad credit mortgage can be more complex. To help you navigate the process, we’ve put together this guide covering everything you need to know about applying for a mortgage with an IVA. We’ll cover:
What is an IVA?
An IVA, or Individual Voluntary Arrangement, is a legally binding agreement between you and your creditors - whether individuals, companies, or third parties you owe money to.
Designed to help those struggling with debt, an IVA allows you to consolidate your repayments into a single, manageable monthly payment. This arrangement enables you to repay what you can afford, and any remaining debt at the end of the term is written off. In this way, an IVA offers a structured way to settle various unsecured debts, including:
Outstanding credit card balances
Overdrawn bank accounts
Personal loan repayments
Unpaid utility bills and Council Tax
Debts owed to HMRC
An IVA must be set up by a licensed debt professional known as an Insolvency Practitioner. They act on your behalf, negotiating with creditors, arranging repayments, and ensuring everything runs smoothly. By putting an IVA in place, you can regain control of your finances and prevent your debt situation from worsening.
How does an IVA affect your credit score?
An IVA will be recorded on your credit report and negatively impact your credit score. This is one of the main reasons an IVA can make securing a mortgage more challenging - lenders will be inclined to view you as a high-risk borrower due to your lower credit rating.
To get a clearer picture of where you stand, consider carrying out a free credit check (free for 30 days, then £14.99 per month - cancel anytime online). This will help you assess your current position and identify any steps you can take to improve your score.
Can you get a mortgage with an IVA?
It’s highly unlikely that you’ll be able to secure a mortgage while your IVA is still active. Most lenders will be reluctant to approve your application, and the strict financial restrictions imposed during your IVA will limit how much you can borrow. In most cases, you’ll need to wait until your IVA has come to an end (6 years) before applying for a mortgage.How long does an IVA last?
An IVA generally lasts for five years, equating to 60 monthly payments. Although, if you miss any agreed repayments, the term could be extended up to six. In either instance, it will remain visible on your credit file for a total of six years from the start date.
During this period, you’ll need to follow certain rules, and your financial flexibility will be limited. Your Insolvency Practitioner will manage the arrangement on your behalf, ensuring that your repayments are made and that you stay on track.
Can I get a mortgage after an IVA?
Yes, it is possible to get a mortgage after completing an IVA. However, it can be challenging, especially in the early stages, as you could be limited to specialist lenders and higher interest rates.
Specialist lenders tend to take personalised approach, evaluating each application individually as opposed to relying solely on rigid criteria. This involves taking a closer look at several key factors, including:
The date the IVA was originally set up
The length of time since it was fully repaid and officially discharged
The underlying reasons that led to the IVA in the first place
The further you are from your IVA’s completion date, the better your chances of securing a mortgage.
Do I have to declare an IVA on my mortgage application?
When applying for a mortgage, you'll be asked about your income, financial stability, and any past credit issues. At this stage, it's essential to disclose any IVA you've had, even if after six years it no longer appears on your credit report.
Being honest from the outset can save you both time and unnecessary costs. If a lender uncovers undisclosed issues later in the process, your application could be declined and any fees paid up to that point may be lost.
Will I need to pay a larger deposit for an IVA mortgage?
Yes, it’s likely that you’ll be required to pay a larger deposit when applying for a mortgage after an IVA.
This is because lenders will tend to view you as a higher-risk borrower due to your past struggles with repaying credit. By asking for a bigger deposit, they reduce the loan amount and, in turn, minimise the risk they take on.
Nevertheless, every mortgage application is unique, and the deposit required will ultimately depend on the lender's specific criteria.
Does an IVA affect your current mortgage?
If you already have a mortgage when you enter into an IVA, your existing home loan is unlikely to be affected, and you’ll continue making repayments as usual.
Although, if you're looking to secure a new mortgage after an IVA, your options will be more limited. Additionally, you may be asked to release equity from your property as part of the arrangement to help settle your outstanding debts.
Can you remortgage with an IVA?
If you own a property when your IVA is set up, there are likely to be restrictions on it for the duration of the arrangement. This means you won’t be able to remortgage or sell your home without the approval of your IVA supervisor.
The specific rules regarding your property will be outlined in the terms of your IVA. It's important to read these carefully so you understand the restrictions you might face while your arrangement is in place.
How can I improve my credit score after an IVA?
Improving your credit score after completing your IVA is a smart move, as it can give you access to a wider range of mortgage products and lower interest rates. Here are some steps to help boost your score:
Register to vote
Correct any errors on your credit file and monitor for fraudulent activity
Make payments on time
Keep credit utilisation low
Avoid moving home too frequently
By maintaining a clean credit report and working to improve your score, you’ll be in a stronger position to secure an affordable mortgage once your IVA is settled.
How a mortgage broker can help with IVAs
Buying a property after an IVA can feel overwhelming, but mortgage brokers are experienced in handling cases like yours. If you’ve had an IVA and are now looking to secure a mortgage, enlisting the help of a bad credit mortgage broker can be incredibly beneficial. They’ll guide you to the right mortgage products and support you throughout the application process, giving you the best chance of success.
At The Mortgage Genie, we’re committed to assisting you every step of the way. Our team of experts has years of experience helping first-time buyers and seasoned buy-to-let investors alike secure the mortgages they need, even with a history of bad credit.
If you’d like help finding and applying for the right mortgage, get in touch with us today by calling 01915809890. We’re eager to discuss your situation and help you find a new property you’ll love.
The above blog has information contained within which was correct at the time of publication but is subject to change.
FAQs
Can you get a joint mortgage with an IVA?
Yes, it is possible to get a joint mortgage when one applicant has an IVA on their credit file. Though, the same rules stand whether you’re applying alone or with someone else. Your chances of approval will depend on several factors, including the details of the IVA, the overall creditworthiness of both applicants, and standard considerations like income and affordability.
Can you get a shared ownership mortgage with an IVA?
If you're still making payments towards an IVA, the majority of lenders will be unwilling to approve you for a shared ownership mortgage. Instead, lenders will focus on how much time has passed since your IVA was fully repaid and whether you’ve maintained a clean credit record since then.
Can I remove an IVA from my credit report?
An IVA will appear on your credit file when it’s set up, remain there during its term, and be automatically removed six years from the start date. If you notice any inaccuracies, you can request a correction from the relevant credit reference agency. To support your request, you’ll need to provide documentation, such as confirmation from your insolvency practitioner.
This information is a guide only and should not be relied on as a recommendation or advice that any particular mortgage is suitable for you. All mortgages are subject to the applicant(s) meeting the eligibility criteria of the specific lender. You should make an appointment to receive mortgage advice which will based on your needs and circumstances.