If you're struggling with debt, you may be considering an IVA as a way to get back on track. An IVA is a formal agreement between you and your creditors that allows you to repay your debts over a period of time. It can be a great way to get out of debt and start fresh. But what happens if you want to buy a house or take out a mortgage? Can someone with an IVA get a mortgage? In this guide, we will answer that question and help you understand your options.

What Is an IVA?

An IVA - or individual voluntary arrangement - is a legal agreement between you and your creditors to repay your debt over a set period of time. Your monthly repayments are based on what you can afford, and any leftover debt is written off at the end of the term. An IVA can be an effective way to manage debt, as it gives you a structure and timeline for repaying what you owe. It also protects you from aggressive debt collectors and gives you some breathing room to get your finances back on track. That said, an IVA will undoubtedly have an impact on your credit score and make it more difficult to access certain types of financial products — including mortgages. This poses the question of how to get a mortgage with an IVA.

Can You Get a Mortgage With an IVA?

It is possible to get a mortgage even if you are in an IVA. However, your options will be limited and the terms of the loan will be less favourable than what you would receive if weren’t in an IVA. This is because lenders view IVAs as a sign of financial difficulty which therefore makes you a higher risk borrower.

There are a few adverse credit lenders that will consider mortgage applications from people with an active IVA. However, they tend to be subprime lenders that offer less competitive rates and terms than those offered by standard lenders; you may be asked for a larger deposit than usual and have to pay a higher rate of interest.

How Long After an IVA Can You Get a Mortgage?

The amount of time that has passed since your IVA will play a role in determining who will lend to you and how favourable your loan terms will be. Essentially, the longer it’s been since your IVA was satisfied, the more lenders and products you’ll have access to.

Let us break this down below:

  • If you’re still in an IVA: lenders will be reluctant to lend to you. Only a handful of very adverse credit lenders will consider lending to you while in an IVA and the money cannot be used to pay off the IVA itself
  • After 12 months: once you have paid your IVA, there are a few more lenders that may consider lending to you after 12 months. However, these will still be subprime and consequently more expensive than standard loans
  • After 3 years: when your IVA has been satisfied for more than 3 years, you will have access to a wider range of lenders but these will still be subprime. You’ll need to pass strict affordability checks and provide evidence that you can afford repayments
  • After 6 years: when your IVA has been removed from your credit file after 6 years, you’ll have access to more favourable loan terms and a wider range of standard high street lenders. Nonetheless, you’ll still need to meet the lender’s criteria and demonstrate that you can afford the repayments

This goes to show that the length of time since your IVA has a significant impact on your ability to access finance, as well as the terms of products available to you. So, it's important to plan ahead and build up your finances before applying for a mortgage if you're looking to get the most favourable deal.

When Is the Best Time to Apply for a Mortgage After an IVA?

This will depend on your individual circumstances, but generally speaking, it's best to wait until your IVA has been settled for as long you can before applying for a mortgage – at least 3 years if that’s possible. This will give you access to more lenders and more favourable mortgage terms.

If you can't wait that long, you may still be able to get a mortgage. It's important to bear in mind that the rates and terms offered by subprime lenders can be expensive and that you’ll need to demonstrate your ability to manage payments responsibly. That said, you can alwaysremortgage after a few years to take advantage of more favourable mortgage terms.

Do You Have to Declare an IVA on Your Mortgage Application?

Yes, you must declare any IVAs on your mortgage application. Even if the IVA is no longer present on your credit file, you need to inform your lender of its past existence if they specifically inquire about it. If you don't, this could lead to more difficulties down the road. This goes for any type of adverse credit - such as CCJs and defaults - so it’s important to be honest about your financial history.

Can I Get a Joint Mortgage With an IVA?

It's not impossible to get a joint mortgage with an IVA, but it’s much more difficult than taking out a loan when both parties have a good credit rating. Lenders want to assess the financial security of both applicants and if one partner already has an IVA, this limits the lenders and products available to you.

You and your joint applicant's situation will be assessed on a case-by-case basis. If possible, and subject to affordability, it may be an option for the person without an IVA to apply for the mortgage by themselves so they can access a better deal. This isn’t always possible and isn’t suitable for everyone as it would mean that only the mortgage borrower would be on the title deeds.

How Can I Improve My Chances of Getting a Mortgage with an IVA?

Approaching mortgage lenders with an IVA can be daunting, but there are steps you can take to put yourself in the best possible position to get approved. The best way to improve your chances of being approved for a mortgage with an IVA is to demonstrate that you’re responsible and have taken steps to manage your debt. Let's look at some of the key steps to take.

Pay Off Any Other Debts You Owe

If you’re looking for a way to increase your chances of getting a mortgage with an IVA, one of the first steps you can take is to pay off any other debts you may owe. Even if those debts are already being taken care of through an IVA, paying them off early can help you get back on track more quickly. It will also help reduce your debt-to-income ratio, an important factor for lenders when assessing your loan application.

If you have any other debts such as overdrafts and credit cards, make sure to pay them off as soon as possible.Settled defaults are viewed more favourably by mortgage lenders than active ones.

Rebuild Your Credit Score

If you have an IVA, the chances are that your credit score isn’t great. However, if you can demonstrate that you’re managing credit responsibly going forward, you can build your credit score back up and improve your chances of being approved for a mortgage despite your previous IVA.

To build up your credit score, make sure that:

  • You make all your payments on time: this includes loan repayments and other commitments such as utility bills, rent and credit/store cards
  • Keep your credit card balance low: your credit utilisation ratio is the total amount of debt you have divided by your available credit and it plays an important role in calculating your score. Keeping this level low (under 30%) will help to improve your score and show lenders that you can manage any credit responsibly
  • Register on the electoral roll: if you're not already registered to vote, do so as soon as possible and make sure that your address is up to date. This simple action can have a big impact on your credit score
  • Check your credit report regularly: regularly checking your credit report will allow you to identify any errors or discrepancies that could be adversely affecting your score. Make sure to check all 3 of the main credit reporting agencies – Experian, Equifax and TransUnion. It's important to note that these agencies use different scoring models, so check all of them to ensure that you get an accurate overall picture of your credit health
  • Avoid moving home frequently: if you currently rent and have a history of moving about a lot this can be seen by lenders as indicative of an unstable living situation

By following this advice and taking steps to improve your credit score, you’ll be in a better position when applying for a mortgage after an IVA. While you may still have higher interest rates on your mortgage, you're more likely to secure better rates than before.

Keep a Consistent, Stable Income

Maintaining a stable, consistent income while demonstrating that you can manage your current debt levels will improve your chances of getting a mortgage with an IVA. If you have had any job changes or lengthy gaps in employment, lenders may be reluctant to approve your loan application.

On the other hand, if you can demonstrate that you’re in a stable, full-time job or receive a consistent income from self-employment this will improve your chances. Make sure you keep copies of pay stubs and bank statements to show lenders when you apply for a mortgage.

Try To Save For a Bigger Deposit

If you are looking to get a mortgage after having an IVA, it’s important to bear in mind that you may need to save a larger deposit. Many lenders may require a bigger minimum deposit from you as an adverse credit borrower. Generally, the bigger your deposit, the more likely it is that the lender will be willing to consider lending money to someone who has had adverse credit in the past. Having a larger mortgage deposit also means you’ll be able to access products with better terms and potentially lower interest rates, which can make mortgage repayments more manageable. While we understand it may be difficult to save if you have or have had an IVA, putting away as much as you can manage each month will demonstrate to lenders that you’re taking steps to become more financially secure.

Avoid Mainstream Lenders

Mainstream lenders such as high street banks and building societies typically have strict criteria in place and are much less likely to accept your application, especially if the IVA occurred in the last 6 years. Even those with slightly less-than-perfect credit scores may find that they are rejected by these lenders, so it's best to avoid them if you have any adverse credit.

Instead, use a mortgage broker like John Charcol who can help you access adverse credit lenders. These specialist lenders look at situations on a case-by-case basis and are able to learn about the circumstances that led to the bad credit event. This means they’re able to consider borrowers with less than stellar credit histories.

Speak to an Independent, Specialist Mortgage Broker

Finally, it's worth speaking to an independent, specialist mortgage broker with experience helping people with IVAs on their credit history secure mortgages.

At John Charcol, we have helped many people with IVAs and other types of bad credit on their credit history to secure mortgages. As an independent mortgage broker, we have access to many adverse credit and subprime lenders that only work through intermediaries. This means that, alongside assessing your situation and giving you our expert advice, we can find you the best deal available for your circumstances.

Summary: Can I Get a Mortgage with an IVA?

It is possible to get a mortgage with an IVA on your credit record. To find out more about how we can help you secure a mortgage, get in touch with us today on 0330 433 2927. Our team of experts are here to answer any questions you may have and help you take the next step towards homeownership.

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