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The ultimate guide: Can I get a mortgage with an IVA?

Getting a mortgage is something you should be able to look forward to and cherish! Unfortunately, mortgages for people with an IVA are not as easy but they are possible- most of the time with help from a mortgage adviser. 

In this blog, we will answer your questions including ‘Can I get a mortgage with an IVA’, ‘What is an IVA’ ‘Where does IVA affect me getting a mortgage’ and what options are out there for someone who has an IVA.

What is an IVA?

An Individual Voluntary Arrangement is a legally binding agreement for an individual to pay back their debt to their creditors. This could be a formal alternative for individuals who are wishing to avoid bankruptcy. 

There are many restrictions when it comes to having an IVA which leaves people wondering ‘Can I get a mortgage with an IVA?’. 

In essence, an IVA is a payment plan for anyone whose debt is getting out of control. In most cases, you will pay back your IVA over an extended period of time for 6 years. By the end of the agreement, any debt leftover will be wiped from your name. Your IVA will affect your credit score, but this may change when the IVA has ended.

Can I get a mortgage with an IVA?

The same as all debt solutions, having an IVA will affect your credit score. Although your credit score will be lower, having an IVA in the first place shows that you want to pay back your debts, so finding a mortgage is still possible. You will need to find a mortgage broker who is willing to lend you the money which is possible with patience and the right practices. Everybody’s situation is different and a mortgage broker will take everything into consideration. 

If you already have a mortgage and then get an IVA: 

  • You may need to release the equity on your home towards your agreement.

If you wish to buy a new home during the IVA there are a few factors to consider: 

  • Disposable income– Your mortgage lender will consider how much your income is and how much your outgoings are including your IVA repayments.
  • Credit history- A mortgage lender will consider a buyer with an IVA a high risk, reducing your chances of using those mortgage lenders. Mortgage lenders will take into consideration your credit report and take into account any debt you hold. 

When you do find a lender willing to lend to you, your interest rates and deposit is likely to be higher. This will make buying a house even more expensive.

What mortgage options are available to someone who has an IVA?

Can I get a mortgage with an IVA? Yes, but there is a vigorous process you need to go through before being accepted for a mortgage. 

Insolvency practitioner permissions– Your insolvency practitioner is the professional that sets up your IVA and communicates with creditors for you. Your IP will take into consideration your situation regarding whether you have kept up with your debt repayments and how much disposable income you have left over. They hold the right to grant you access if they believe you can afford it. 

See what interest rates and deposits you can get– Interest rates and deposits are higher for people with an IVA. This is because higher deposit and interest rates will mitigate the fact that it is high risk. 
Be wary of specialist lenders– Although specialist lenders are your best chance at getting a mortgage, they know this and will up their interest rate and deposit because it’s unlikely that someone else will accept you. With this in mind, it’s important that you ask different lenders even if you don’t get accepted.

We hope you enjoyed our blog ‘Can I get a mortgage with an IVA?’. If you would like to know more about getting a mortgage with an IVA, get in touch with Peak mortgages today.