Mortgage After an IVA
Bad credit events and competitively priced, low deposit mortgage deals rarely go in hand in hand when you approach the high street lenders. Before the banking crisis and subsequent economic meltdown, the banks and building societies were very relaxed about their lending. This carefree attitude led to an increase in ‘sub-prime’ lending – extending credit to people with a poor credit history, often at inflated rates of interest. This was deemed to be one of the leading causes of the financial crash.
Understandably, the banks and building societies are now a lot more cautious about who they lend to, and how much they will offer. This has made it increasingly difficult to secure a competitively priced mortgage with IVA or any other adverse event on your credit file.
What is an IVA?
An IVA – or Individual Voluntary Arrangement – is a formal, legally binding agreement between an individual and their creditors. It must be set up by an insolvency practitioner, who will be a qualified accountant or a solicitor, and approved by the court. It will also be recorded on the Insolvency Register.
It is the job of the insolvency practitioner to assess your finances and help you come up with a reasonable payment plan that you can realistically afford, and that your creditors are likely to accept. The insolvency practitioner will act as an intermediary and deal with your creditors on your behalf for the duration of the IVA – typically five years. They will invariably charge a fee for this service.
Once the proposal has been accepted by your creditors, all interest and charges will be frozen and creditors will be prohibited from demanding additional payments from you. You will make the agreed monthly payment to the insolvency practitioner, who will deduct their fee where applicable then forward the appropriate amount of money to each creditor.
When the period of time the IVA was set up for has passed, and provided you have kept up with the payments, any debt that was not paid off over the course of the arrangement should be written off. This means you no longer owe those creditors any money.
Finally, the record of the IVA will be removed from the Insolvency Register.
Can I get a mortgage after an IVA?
Finding a competitively priced mortgage with an IVA can pose some problems and, realistically, it is likely to cost you more than if your credit history had a clean bill of health. However, there is no reason why someone with an IVA cannot apply for a mortgage, and there are specialist lenders out there who will be able to help secure the most favourable deal possible.
The problems you will encounter when trying to secure an IVA mortgage are caused by the impact the IVA has on your credit rating. All mortgage lenders carry out credit checks to help them assess the risks involved in their lending decisions. Most mainstream and high street mortgage lenders will decline an application when they see an active IVA on your record. Fortunately, there are some specialist bad credit lenders that are prepared to offer mortgages to people in an IVA, although higher interest rates may apply and the deposit size for IVA borrowers is likely to be bigger.
So, there are lenders out there that will consider your application and, in theory, it is possible to obtain a mortgage agreement with an IVA. Bear in mind, however, that each application will be assessed on a case by case basis on its own individual merits.
How long does an IVA last on credit record?
An IVA will show on your credit file typically for six years from the day it starts. This means that if your IVA has lasted for a period of five years, you will still have 12 months to go before it is removed from your record. Once the six years are up, and as long as you stuck to the IVA agreement without any missed payments or further defaults, your credit file should be clean.
The caveat, however, is that even faced with a clean credit record, lenders will generally ask whether any arrangements such as IVAs have ever been entered into. If the answer is yes (and you must be truthful about such things), they will likely still decline the application even though the IVA is no longer on either your record or the insolvency register.
Another issue to bear in mind is that a clean credit record is not necessarily a good credit record, as essentially you are starting from scratch. You have no payment history to show whether you are a good risk, and will now have to rebuild your credit rating to present an attractive proposition to lenders. There are a number of things you can do to repair your credit score, but your starting point should always be to access your credit report from Callcredit, Equifax and Experian, the three main credit reference agencies. You can do this by post or online.
Alternatively, just get in touch with our team today for advice on how to obtain a free copy of your report.
What to look for on your credit report
Credit reports only stretch back six years, so in theory, once your IVA has expired, your report should be clean. However, it is important you check all the details are correct. Make sure your name and address are registered accurately and any mistakes on your file are corrected. You should also check there is no adverse credit information after the starting date of your IVA.
How to get a mortgage after an IVA
If you are looking for a mortgage with IVA, we can endeavour to help. Our dedicated bad credit mortgage team works with a network of specialist lenders across the UK, and we know exactly where to turn to find the best deal to meet your particular circumstances. With unlimited access to the market, we offer thousands of mortgage products including exclusive rates that are not available on the high street. We also offer free, no obligation initial advice to help you consider your options.
To kick-start your search for a competitive bad credit mortgage with IVA, please get in touch with our specialist bad credit mortgage brokers today.
Can I remortgage to pay off an IVA
Remember that a properly set-up and administered IVA is designed to be an effective way of taking responsibility and handling your debts. But having an IVA on your record, even though it shows that you are willing and able to manage your finances and make regular repayments on a debt, will sadly have a negative impact on your application for a mortgage or remortgage.
Remortgaging is often a very good way to raise capital to consolidate your debts – the interest rate on a mortgage is typically more favourable than that for a personal or secured loan – but getting a mortgage while an IVA is in place can be sometimes problematic. However, if you have enough equity already in your property and are able to show an improvement in your financial situation – as well as having taken steps to fix as many outstanding issues on your credit record as possible – then your chances will be a lot better.
At Just Mortgage Brokers, we deal with many specialist lenders who understand IVAs and who take a more flexible, broader view on your personal finances than a mainstream provider, especially where things have changed in more recent years. They could be prepared to offer you a mortgage even while an IVA is still active, or a remortgage to pay off the debt and clear your credit record of the black mark. Talk to us to find out more.
How do I remortgage with an IVA
The process of getting a remortgage after an IVA can be quite straightforward if you are working with a specialist adviser who has an in-depth knowledge of the market, and the criteria and systems that lenders use to assess mortgage applicants. It’ll mean you have to be open and honest about your financial history, but also about what has changed since the IVA was set and the measures you have taken to bring better management to your money. You will also need to have a decent amount of equity already in the property.
Due to the personalised nature of the application, the process of underwriting a mortgage while you have an IVA in place will need to be done manually rather than dealt with by automated computerised algorithms. The benefit of this is that a real person will be going over your circumstances and figures before assessing your situation and making the crucial decision. Being human, the underwriter will be able to take a broader view of your position financially, and have a better understanding of the nuances of human behaviour, characters and outcomes. Where a computer might automatically say ‘no’ upon seeing a negative fact, a real person will understand its context in relation to your current circumstances and may say ‘yes’.
One of our experienced (and human!) advisors will be able to take a good look at your individual situation, offer solid advice for how to move forward, recommend deals not found on the high street and match you with the right lender for your circumstances.
Mortgage Rates after an IVA
As outlined above, if you have previously been subject to an IVA (Individual Voluntary Arrangement), whether this still rests on your financial record or not, then it is likely to prejudice a lender’s assessment of your application, and they will probably view you as being a greater lending risk than a conventional borrower with a clean credit history. To reflect this perceived increased risk, lenders are likely to impose a higher mortgage rate than those you would traditionally find offered on the high street.
The exact rate you are offered will depend on several factors, such as the nature of the IVA and when it occurred, the amount of deposit you are able to provide and your exact income, as well as other elements such as how bad your credit score is overall, other evidence of credit worthiness, any other existing debts, and so on. As a rule, the larger the deposit you are able to supply, or the greater amount of equity you already have in a current property, then the better the deal you will be able to access, and the more favourable the interest rate will be.
At Just Mortgage Brokers, our teams include several specialist advisers and expert brokers who possess an in-depth knowledge of the adverse credit mortgage market, which is often subject to shifts, changes and new products according to the prevailing economic landscape. Once they have a complete understanding of your current circumstances and financial background, they will know exactly which lenders to approach for a mortgage to meet your needs, and will do their utmost to achieve the most competitive interest rates available so your monthly repayments are no more than they should be.
Mortgage Lenders after an IVA
Mainstream banks and lenders tend to shy away from talking to borrowers who have suffered financial problems such as an IVA at any time in their past. However, this has encouraged a growing number of new, specialist lenders to enter the market in the last decade, with products designed to fill this gap in requirements and help people who may otherwise be left by the wayside when it comes to home ownership.
It would be impossible to list all the specialist lenders who consider applicants with an IVA here – products and deals come onto the market and are taken off all the time, and new lenders may even emerge at the time of writing. But they will typically only deal with applications made through a trusted third party or broker (such as us at Just Mortgage Brokers), and each will have their own criteria for the nature of the IVA, registration and satisfaction. In general, they are more flexible than most, and there has never been a better time for people with poor credit histories for whatever reason to get a mortgage.
To discover the best lender to suit your circumstances and requirements, we’ll need to go over your personal situation and get a thorough overview of where you currently stand. Contact us now to book a free, no-obligation initial discussion.
CAN I SELL MY HOUSE WHILE IN AN IVA?
Yes, you can sell your house while you are in an IVA, but it may come with some consequences. Selling your house to raise capital to pay off your debts is definitely one way to clear the IVA and put you back on a better financial footing, and the IVA company or Insolvency Practitioner may actually demand that you do so.
Creditors are quite within their rights to expect you to pay off the debts, and the Insolvency Practitioner may have actually already asked if you can remortgage your property to raise funds. However, finding a lender willing to grant a new mortgage while the IVA is still in place can be problematic, and it might be that you do not have sufficient equity in the property as it stands.
In selling your house, any capital released can be used to settle debts to help you move forward on a surer financial footing. You may aim to rent a new home, or downsize to a smaller house, with any surplus funds you have after settling debts becoming available for reinvestment in a pension, trust or other savings plan.
However, it’s worth making sure this is the best course of action for your circumstances. Aside from the stress of finding somewhere else to live if your house is your primary residence, it could be argued that you could be better off staying in the long run if local property market patterns indicate it could increase in value in the future. It all depends on your reasons for moving and wanting to sell. If in doubt, always get advice from an expert mortgage adviser.
HOW SOON AFTER AN IVA CAN I GET A MORTGAGE?
An IVA usually lasts for five years, during which time you have to pay agreed instalments to your creditors, via the Insolvency Practitioner, to pay off your debt. Once this has passed, the debts are considered cancelled, you are sent a completion certificate and the IVA is removed from the Insolvency Register, although it will remain on your credit record for a further year (as the record covers six years), with a note that it has been cleared. You should get copies of your credit report from the three main credit reference agencies in the UK – Experian, Equifax and TransUnion (previously Callcredit) – to make sure their records have been updated.
You can apply for a mortgage straight away after your IVA has been discharged, although lenders will still take it into consideration. While its previous existence will deter many lenders, there are some specialists who would be willing to provide a mortgage to people who have been in an IVA that has been completed.
We would recommend that you wait at least until you are removed from the Insolvency Register (usually this happens within three months of completion) and take all possible measures to improve your credit rating before making a new application for a mortgage. Even after the IVA has fallen off your credit record after six years, mortgage lenders are still likely to ask you if you have ever been in an IVA, and you must answer this question honestly. As specialist mortgage brokers, we will be able to help you frame your application in such a way as to give it the best chance of acceptance.
Mortgage Advice after an IVA
f you have been subject to an IVA in the past, then it’s going to be almost certain that you’ll need expert professional advice when looking for your first or next mortgage. The majority of high street lenders are not willing to lend to anyone who has previously incurred an IVA, and it will take an experienced specialist adviser to understand your individual circumstances, go over all the options available to you – including those products offered by specialist mortgage lenders – and present your application in such a way that it stands the best chance of success.
Mortgage advice if you have been subject to an IVA is very much a specialist area. It takes an understanding of the processes involved and what it may have taken to bring your finances back onto an even keel. Even if the IVA has slipped off your credit report after six years, it’s likely that a lender will ask you if you have ever entered into an Individual Voluntary Arrangement, and in this case you must answer truthfully (trying to hide the fact will likely result in breach of contract and the withdrawal of your mortgage when the lender becomes aware of the IVA).
The spectrum of lenders and products available in the UK market is incredibly broad and constantly changing as new offers and schemes come into play, and new lenders enter the market. It is important to speak to a mortgage broker who understands this market, as the wrong advice can have an adverse effect on your credit worthiness. They will know exactly which lenders will be willing to consider your application if you have had an IVA, thereby avoiding any further rejections and more black marks on your credit report.
Please submit your details via our contact page – we will be happy to advise you on the options available to you and put you on the right path to home ownership.
- - Can I still have a mortgage even though I am in an IVA?
- - How long does an IVA last?
- - What do I need to prove my IVA has been discharged?
- - Do I have to wait 6 years from when my IVA is discharged to get a higher loan-to-value?
- - Will all lenders allow you to borrow money when you have had an IVA?
- - How do I get an IVA?