Get a Mortgage With an IVA

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Can you get a mortgage with an IVA? (Part 1)

Luke explains how it works when you want to get a mortgage with an IVA. Part one of two, recorded in July 2024.

What is an IVA and how does an IVA work?

An Individual Voluntary Agreement (IVA) is a plan for people who have got themselves into a bit of a pickle with debt. It wipes out quite a lot of the debt – usually around 70%. The plan will normally last for five years, but it could be paid off a bit sooner.

Because it’s wiping out debt, it will do quite a bit of damage to someone’s credit profile. Entering an IVA creates a number of defaults on someone’s credit profile. Those will stay there for a while, depending on how long the plan lasts for.

Can you get a mortgage with an IVA? How long after an IVA can I get a mortgage?

Yes, you could get a mortgage with an IVA and there are lenders that could do it straight away, if you were remortgaging, for example, or if you were purchasing and able to pay it off.

An IVA does have restrictions on it, and you can’t usually borrow more than £500 – obviously a mortgage is going to be more than that. For that reason, the IVA would need to be paid off to enable you to get a mortgage.

So it’s not necessarily a case of how long it is, because if you could pay it off you could get a mortgage. Once it is paid off, and longer ago it is, the more lenders will open up to you.

In the early days you’re going to be looking at much more specialist lenders and often quite a high deposit – or high equity within your property if you’re looking at remortgaging. The longer after it has been registered and satisfied, the more lenders will be accessible.

What is the lending criteria for a mortgage with an IVA?

The lending criteria is going to be quite strict, depending on the circumstances. If it’s fairly recent, because of the damage to your credit profile, we’re going to need a specialist lender.

Even with the specialist lenders, for someone with an IVA they need everything else to be a strong case. For example, if you’ve just gone into an IVA, you’ve also just started a new job, and you’ve had a gap in employment – those are multiple risk factors to a lender.

But if you’ve had stable employment, you’ve got quite a lot of equity in your property and everything else is a good case, a lender will be happier.

Once the IVA starts getting more historic in terms of when it was registered or satisfied, that will open up more mainstream lenders. Then, even if you have just been offered a new job, they could consider it.

How much can you borrow with an IVA and what deposit will you need for a mortgage with an IVA?

The borrowing amount is really lender dependent. When we run affordability calculations with a lender, it could return all sorts of different figures. We might have somebody earning £30,000 and has £5,000 worth of overtime per year – and 10 different lenders would come back with 10 different borrowing figures.

The deposit is a bit more circumstantial, but if the IVA is still live or recent and you’re looking to pay it off, you will need quite a high deposit – about 30%. However, when it becomes satisfied, and the longer that it’s satisfied, the level of deposit required will drop down.

If it’s been three years or so, you might be OK with a 20% deposit, and then if it gets to over six years, it’s starting to drop off your credit file so you might just need 15% or 10%.

Can you pass a credit check with an IVA?

Every lender will do a credit check. They need to see exactly what’s on your credit profile. The specialist lenders have set criteria around when the IVA is registered, when it was satisfied and how many defaults are associated with it.

As the IVA gets more historical, we could approach mainstream lenders, who will base it all on a credit check. If it passes, great, but if it fails there’s no appeals process or a manual way to assess it. The decision is the decision.

Do I have to declare an IVA on my mortgage application?

Yes, if a lender asks, and most will. It will always come out at some stage. If it’s on your credit profile, it will come out quite quickly.

Again, if it’s a specialist lender who’s going to manually assess everything, they’re going to pick it up. So it’s always right to be truthful and accurate when you’re submitting an application.

Will I need to pay a larger deposit or higher interest rates for a mortgage with an IVA?

Typically, yes – both a larger deposit and a higher interest rate if the IVA is quite recent. It will thin down the number of lenders. Specialist lenders who are able to consider quite a harsh credit profile will fund themselves by charging higher interest rates. There’s no way around that, unfortunately.

But again, as it gets more historical and you could look at more sort of mainstream options, the lenders are more competitive, which means lower rates. It always depends on the circumstances. The longer it’s been since the IVA was registered and satisfied, the more mainstream options it potentially unlocks for you.

How long does an IVA last, and how long does it stay on your credit file?

Typically an IVA lasts for five years. It’s a programme to get somebody debt free.

There could be circumstances where you could pay it off sooner. Sometimes people might go into an IVA and then they get some inheritance and could pay it off after a couple of years.
Or, if they’re remortgaging and there’s enough equity, they could pay it off with that. In those cases, it wouldn’t necessarily run the full five years.

In terms of the credit file, any adverse credit on your credit file is there for six years. If it was registered today, in July 24, it will be on the credit file until July 2030.

Some lenders won’t consider a customer that has ever had an IVA, even if it’s no longer on the credit file. That’s something that will come out later down the line, when the solicitor’s doing all their legal checks.

Speak to somebody impartial to find the most suitable lender for you.

How badly does an IVA affect your credit rating?

It will have quite a nasty impact on your credit profile. When somebody enters into an IVA, on any debts within that, the creditors will default the account straight away. That marker will be on your credit file again for six years in total.

It does do a lot of damage. It could wipe your debt, but because of that it is quite a harsh form of adverse credit and could restrict the number of lenders available to you.

How can I improve my credit score after an IVA?

Time heals all wounds. The longer you’ve had the IVA satisfied, you’ll see your credit score slowly start to improve. If it’s very recent, you will probably have quite a low credit score because of all the damage done.

When you get to the point where it’s been satisfied and any defaulted accounts have been paid off, you start to see a boost to your credit score.

Six years since any accounts are defaulted or the IVA is satisfied, it will drop off your credit profile. Once you lose all that adverse credit from your profile, your score will massively improve and you could essentially end up with clean credit.

We could help give people hope. If you’ve got a very recent IVA you won’t have too many lender options, but soon, if everything stays well, you could be looking at more mainstream lenders.

Myself and many of my colleagues have worked with people who have IVAs where we’ve had to go with specialist lenders at quite high rates. But then when we’ve come around to remortgaging, everything’s got better for them. We could look at more mainstream options and more favourable rates.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Speak To An Expert

As specialist mortgage brokers we pride ourselves on being able to help people with complex situations. Whether that be self-employed or more unusual income types, credit issues from minor credit blips right through to Bankruptcies and IVA’s, even mortgages for unusual property types, and more! Our expertise ensures that we can find the right mortgage solution tailored to your specific circumstances.

Can you get a mortgage with an IVA? (Part 2)

We continue the conversation with Luke about how the mortgage process works if you have an IVA. Part two of two, recorded in July 2024.

Can you remortgage with an IVA?

Yes, absolutely. The thing with an IVA is that it restricts you to a few lenders because of the severity of the damage it does to one’s credit file. But if you have quite a reasonable amount of equity in the property, then yes, it’s absolutely possible.

What do I need to prove my IVA has been discharged?

Typically you’ll get some IVA discharge paperwork from the IVA practitioner. That will come shortly after you’ve been fully discharged.

An IVA could last for five years, but there might be circumstances where you could pay it off quicker. One route is to potentially raise funds from a remortgage to repay that.

Once it’s repaid it will still linger on the credit file for a while, as will any accounts that have gone to default. But as soon as the IVA is paid off, you will open up more mortgage options. Even if it’s live, there are certainly options where you could still remortgage.

Do I have to wait six years from when my IVA is discharged to get a higher loan to value?

Not necessarily, but as time passes, it will open up more options for you. If it’s on the credit file, there are lenders that could do it a short time after it’s been discharged. It will also depend on when the IVA was registered.

For example, if it was registered and then ran a five-year course, and you waited another three years, that’s eight years since it was registered. Every lender’s got different criteria around IVA, so it just depends what their stance is. But in the main, the longer it’s been since you were discharged from the IVA, the better.

It is also worth noting there some lenders just can’t consider the case if you’ve ever had an IVA. Every single lender has different criteria, so it all depends on the specifics.

Can I get a joint mortgage with an IVA?

You could. We often come across clients where one party has some adverse credit and the other has a completely clean credit profile. Sometimes both parties have some adverse credit.

Again, it’s going to depend on the specifics, but an IVA is quite a serious form of adverse credit. If one person has got an IVA, provided the other person’s not in a worse state, there should certainly be options. That could be true even if the second person has a couple of missed payments or defaults.

Why choose an IVA plan?

It’s designed for people who get themselves into a bit of a pickle. It could wipe off a lot of debt, which could give you some reassurance. It does leave quite a negative footprint on your profile, but it could help if you’re in a difficult situation.

Because an IVA could wipe off about 70% of people’s debts, it almost gives you back a clean slate. The plan attached to it usually runs a five year course, and as long as you keep the payments up, within five years you’ll be debt free.

There could be any number of reasons why someone ends up with an awful lot of debt that feasibly is not going to be paid off anytime soon. You might have £50,000 worth of debt, for example, and an income of half that – perhaps £25,000.

That’s why people go down that route. It’s always worth seeking advice before you make a decision. It will damage your credit profile, so explore if there are any other options.

How do I get a mortgage during an IVA?

There are restrictions on an IVA where you can’t usually borrow more than £500. So, to get a mortgage, your IVA would have to be settled. If you were remortgaging, you could remortgage and release funds to pay that IVA off.

The deposit is going to be quite high. Typically, you need about a 30% deposit, or perhaps 25%. As the IVA becomes more historic, either since it was registered or when it was satisfied, that might reduce the deposit that you need.

Do I have to declare an IVA when applying for a mortgage in future?

Yes, and most lenders will ask if you’ve ever had an IVA. It could vary. There might be a lender that asks if you’ve had an IVA within the last six years, or another set period of time.

You should always be truthful and accurate when you submit a mortgage application. Don’t withhold something from the lender because it will come out later down the line. If it’s live or quite historic, it’s still going to show up on your credit file. There’s no way to game the system.

Can I get a Right to Buy mortgage with an IVA?

Yes, you could. One of the benefits of Right to Buy is that it gives you a large discount. Something to bear in mind is that not every single lender does Right to Buy mortgages. That could restrict the pool of lenders available to you. Factoring in the IVA could further limit that pool.

Can I get a shared ownership mortgage with an IVA?

That’s similar to the Right to Buy situation. It would be the same sort of process, and not every single lender offers shared ownership mortgages. We then need to factor in the IVA, so it will depend on their criteria around that.

We do work with a provider that could consider live IVAs as long as they’re paid off. Ths lender will do Right to Buy mortgages as well as just regular mortgages, but they don’t offer shared ownership products.

Will all lenders allow you to borrow money when you have had an IVA?

Not all lenders will allow you to borrow money when you’ve had an IVA. It just won’t fit their criteria. But there are lenders that will allow you to borrow money, even if you have a live IVA and could get that paid off, or if you had one historically and that’s now gone. That could apply to a remortgage or a purchase.

It’s a good idea to speak to someone who’s got access to a wide range of lenders to run you through the options. We would let you know what could be done, what deposit you need and what the interest rates might be.

How can a mortgage broker adviser help somebody with an IVA?

It’s essentially letting you know what your mortgage options are. You might already have an IVA or are considering it. Another route you might decide to go down is a debt management plan.

A debt management plan doesn’t wipe out your debts, but commits you to a monthly payment. An IVA will wipe off the debts, but because of that, it’s seen in a harsher light from lenders.

Lenders will be more generous if someone’s got a debt management plan versus an IVA. So if you are in a pickle right now but you are planning to remortgage or purchase a property in the future, it’s worth speaking to us. You’ll then know exactly where you stand.