Can you get a mortgage with an IVA?
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Can you get a mortgage with an IVA?
Ashleigh Halit explains how previous IVAs can impact your chances of getting a mortgage.
What is an IVA and how does an IVA work?
An IVA is an Individual Voluntary Arrangement. Basically, it’s a formal and legal binding agreement between you and your creditors to pay back your debts over a period of time.
It’s approved by the courts and your creditors, so it’s binding and you have to stick to it. It’s for somebody that’s struggling with their debts, as a way to get support. You agree with the creditors to pay a specific amount over a period of time. Usually they last five years, but they can go on to six years.
Can you get a mortgage with an IVA? How long after an IVA can I get a mortgage?
Whilst you’re in the IVA, you can’t get a mortgage. Most lenders say that you need to be discharged from an IVA for at least three years before you can obtain credit with a mortgage.
What are the lending criteria for a mortgage after an IVA?
Generally it needs to be at least three years since you were discharged from the IVA. After that, you’re just considered on the merits of your credit file. There’s nothing specific at that point.
How much can you borrow with an IVA? What deposit will you need for a mortgage with an IVA?
Again, you can only get a mortgage three years after the IVA. The deposit depends on your situation and the lender. Providing everything else is fine, there’s no reason why you couldn’t get a mortgage with a 5% deposit.
Can you pass a credit check after an IVA?
After you’ve had the IVA, yes, potentially you can pass the credit check. Some lenders don’t use credit score as a metric. They will actually look at the credit report.
Even if you go to a high street lender and don’t pass the credit score because it’s a little too low, you can approach other lenders that don’t use credit scores. They would have a look at the credit report and use the information within that to see if you fit within their credit criteria.
Do I have to declare an IVA on my mortgage application?
Yes, you do. Most mortgage applications ask if you’ve had any previous IVAs or bankruptcies. Always make sure you declare this. You don’t want it to cause you a problem down the line when you’re trying to get a mortgage.
Will I need to pay a larger deposit or higher interest rates for a mortgage after an IVA?
No, not necessarily. It depends on the state of your credit file coming out of the IVA and your overall profile. Lenders consider many different things in deciding what deposit you need to pay. It depends on the lender, but you could get a mortgage with a deposit as low as 5%.
In terms of interest rates, once you’re out of the IVA we’ll determine what type of rate you could potentially get. It’s not just your credit score that determines the interest – it’s also the amount of deposit you put down.
Seek advice from a mortgage broker with experience in dealing with people that have previously come out of IVAs, because they will know which lenders you can go to.
How long does an IVA last? How long does an IVA stay on your credit file?
The IVA itself usually lasts five to six years, and then once you’re discharged, it stays on your credit file for six years.
Does an IVA affect your credit history? How badly does an IVA affect your credit rating?
The IVA will affect your credit history and credit rating. But once you’re out of the IVA and it’s been removed from your file, your school will gradually improve.
The key thing is to understand how to budget your money, so that you’re not reliant on credit cards or loans. You need to live within your means to avoid ending up back in that situation again.
Not everybody develops bad credit because they take out lots of debt. It could be that something has happened in your life – perhaps you’ve been unwell and didn’t get sick pay from work. There are lots of reasons why people end up in an IVA.
The important thing is to make sure that once you’re out of it, you focus on only taking out what you can afford to pay back. Set your payments up on direct debit to keep on top of your credit and improve that score as much as you can.
Start off with small bits of credit that you can manage to pay back. Lenders do like to see a good payment history, so you have to take something out to demonstrate that you can make those payments on time.
How can I improve my credit score after an IVA?
It’s along the lines of what I’ve just explained. There are other things that impact your credit score as well – making sure you’re on the voters roll will instantly improve it.
Don’t have too many credit lines open. You might go and get a credit card, and then another one and another, thinking you’re improving your score. But if you have too many, even if you’re not using the balances, lenders see that those credit lines are available to you. You could go out tomorrow and spend on all of them.
Keep on top of your payments and set up direct debits. Only take what’s within your budget. You need to meet those monthly commitments, so that you’re not going to struggle or end up using credit to live, or credit to pay back credit. Sometimes people get in those situations, and it’s really difficult to get out again.
Once you’re out of the IVA, you need to live within an affordable budget and be cautious with any credit commitments you’re taking on. These are the sort of things that you can do to help.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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Can you get a mortgage with an IVA? (Part 2)
Ashleigh Halit continues the conversation on mortgages when you have an IVA. Episode two of two, recorded in December 2024.
Can you remortgage with an IVA?
Yes, once the IVA is complete. You’re going to follow the same process as anyone else applying for a remortgage. It comes down to the lender’s criteria. Your up-to-date credit report will be looked at. As I mentioned previously, some lenders don’t look at the actual credit score – they take a more flexible approach to underwriting and look at the details within that report.
A lot of lenders will be able to help you once you’ve completed your IVA. My advice would be to go to a mortgage broker because they have access to the whole market. If you try to approach the lenders yourself, it could be quite time consuming to research which ones can help.
What do I need to prove my IVA has been discharged?
Usually once your IVA has been discharged, you’ll get a letter from the company. The credit search will also show what’s happened with your debts and that they’re paid off. It depends how long the IVA has been settled.
Have that completion letter to hand, and if you are using a mortgage broker, give them that information along with a copy of your credit report. Lenders would also do credit searches, and hopefully it should all be updated, but the letter will clarify exactly when that IVA was completed.
Do I have to wait six years from when my IVA is discharged to get a higher loan to value?
You don’t have to wait six years from when your IVA is discharged. It depends what kind of Loan to Value you need. There are a lot of lenders out there all with different credit criteria, and they will assess the application not just based on the Loan to Value, but also your income.
Your application will be assessed as a whole to determine what exactly you can get. A mortgage broker will sit down with you to explore your situation, and then identify the lenders that can hopefully help you.
Can I get a joint mortgage with an IVA?
You can get a joint mortgage after an IVA. Your credit still needs to be assessed. We had a case recently with a client that had come out of something similar, but had arrears on his utility bills. Even though the IVA wasn’t live any more, the arrears were.
Every application is assessed as an individual case. Some people may have visas and have not lived in the country very long. Lenders will have a look at everything rather than just one thing in isolation.
How do I get a mortgage during an IVA?
It would be after the IVA. Once you’re committed to an IVA, you’re not able to take on any further debts. You would need to wait until after the IVA has been completed before looking to take on finance again.
Do I have to declare an IVA when applying for a mortgage in the future?
Yes. A lot of lenders will ask if you have ever had an IVA debt management plan or been declared bankrupt. The key word there is ‘ever.’ You would need to declare that. The lender just needs to have an understanding of what’s happened in the past.
Obviously, after six years have passed it won’t show up on your credit report any longer, but the lender would expect you to be honest.
Can I get a Right to Buy mortgage with an IVA?
Yes, the good news is you can. Again, it depends on the particular lender, but there are lots of them and they all have different credit criteria and policies. It’s usually possible once your IVA has ended.
Can I get shared ownership with an IVA?
After the IVA, there’s no reason why you can’t get a shared ownership property. As with any mortgage, your situation will be taken into account. They’re going to be looking at your income, affordability and your time as a resident in the UK.
Again, it depends what’s happening with your credit profile after the IVA. Your case will be assessed as per any mortgage.
Will all lenders allow you to borrow money when you’ve had an IVA? Which lenders can provide this?
Not every lender will necessarily work with you immediately after the IVA. It depends on how long you’ve been out of the arrangement. There’s a small number of lenders available once you’ve completed the IVA for a year. But as time progresses, you would then fit into more lenders’ criteria.
It’s certainly a reduced number of lenders that would be prepared to work with you, but the good news is that there are lenders out there that are willing to take a view on the case.
How can a mortgage advisor or mortgage broker help with IVAs?
A mortgage advisor will be able to give you more information about the types of lenders that we can approach. We have expertise, skills and knowledge – and many brokers will have handled cases very similar to yours. Sitting down with a professional for the right advice is going to save you time and hopefully money.
You want to make sure that you’re getting placed with the right lender in the market on the right deal for you. In cases where there’s something a little bit outside of the norm, a broker’s advice is invaluable.
It definitely helps to talk to a broker who can really understand your needs and knows where to start looking to place your case. You will definitely feel the value of spending that time with us.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
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